<PAGE>
Filed pursuant to Rule 424(b)(1)
Registration File No. 333-53735
PROSPECTUS
- --------------------------------------------------------------------------------
$648,875,560
Copelco Capital Funding Trust 1998-A, Issuer
Copelco Capital, Inc., Servicer
$194,662,668 5.680% Class A-1 Lease-Backed Notes, Series 1998-A
$ 92,208,632 5.780% Class A-2 Lease-Backed Notes, Series 1998-A
$148,558,352 5.780% Class A-3 Lease-Backed Notes, Series 1998-A
$162,218,890 5.920% Class A-4 Lease-Backed Notes, Series 1998-A
$ 17,075,673 5.940% Class B Lease-Backed Notes, Series 1998-A
$ 13,660,538 6.010% Class C Lease-Backed Notes, Series 1998-A
$ 20,490,807 6.330% Class D Lease-Backed Notes, Series 1998-A
The Copelco Lease-Backed Notes, Series 1998-A will consist of the
following classes (each, a "Class"): (i) the Class A-1 Notes (the "Class A-1
Notes"), the Class A-2 Notes (the "Class A-2 Notes"), the Class A-3 Notes (the
"Class A-3 Notes") and the Class A-4 Notes (the "Class A-4 Notes", together with
the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes, the "Class A Notes"),
(ii) the Class B Notes (the "Class B Notes"), (iii) the Class C Notes (the
"Class C Notes"), (iv) the Class D Notes (the "Class D Notes") and (v) the Class
E Notes (the "Class E Notes", together with the Class A Notes, the Class B
Notes, the Class C Notes, the Class D Notes and the Class E Notes, the "Notes").
Only the Class A Notes, the Class B Notes, the Class C Notes and the Class D
Notes (together, the "Offered Notes") will be offered hereby.
(cover continued overpage)
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
An investment in the Offered Notes involves certain risks. See "Risk
Factors" commencing on page 19 for a discussion of certain factors that
should be considered in connection with an investment in the securities
offered hereby.
THE OFFERED NOTES WILL NOT REPRESENT AN INTEREST IN OR AN
OBLIGATION OF COPELCO FINANCIAL SERVICES GROUP, INC., COPELCO CAPITAL,
INC., COPELCO CAPITAL FUNDING CORP.
XI OR ANY OF THEIR AFFILIATES, NOR WILL THE OFFERED NOTES
BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY.
<TABLE>
<CAPTION>
=====================================================================================================================
Initial Public Underwriting(1) Proceeds to Issuer(2)
Offering Price
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A-1 Lease-Backed Note 100.00000% 0.10% 99.90000%
- ---------------------------------------------------------------------------------------------------------------------
Per Class A-2 Lease-Backed Note 99.99523%(3) 0.15% 99.84523%
- ---------------------------------------------------------------------------------------------------------------------
Per Class A-3 Lease-Backed Note 99.99260%(3) 0.20% 99.79260%
- ---------------------------------------------------------------------------------------------------------------------
Per Class A-4 Lease-Backed Note 99.97488%(3) 0.25% 99.72488%
- ---------------------------------------------------------------------------------------------------------------------
Per Class B Lease-Backed Note 99.98064%(3) 0.25% 99.73064%
- ---------------------------------------------------------------------------------------------------------------------
Per Class C Lease-Backed Note 99.98438%(3) 0.30% 99.68438%
- ---------------------------------------------------------------------------------------------------------------------
Per Class D Lease-Backed Note 99.98087%(3) 0.40% 99.58087%
- ---------------------------------------------------------------------------------------------------------------------
Total............................. $650,734,929.80 $1,201,273.57 $649,533,656.23
=====================================================================================================================
</TABLE>
(1) Copelco Capital has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933.
(2) Before deducting expenses estimated to be $768,225.
(3) Plus accrued interest from July 15, 1998.
The Offered Notes are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel, or modify any order without notice.
It is expected that delivery of the Offered Notes will be made in book-entry
form through the facilities of The Depository Trust Company, Cedel Bank, S.A. or
the Euroclear System on or about August 11, 1998.
Underwriters of the Class A Notes
First Union Capital Markets
Lehman Brothers
Prudential Securities Incorporated
Underwriter of the Class B Notes, Class C Notes and Class D Notes
First Union Capital Markets
The date of this Prospectus is August 6, 1998.
<PAGE>
(continuation of cover)
The Issuer will also issue one or more classes of residual notes (the
"Residual Notes") and one or more classes of certificates, all of which
certificates will be initially retained by Copelco Capital Funding LLC 98-1, a
Delaware limited liability company, as sponsor ("Copelco Funding LLC" or the
"Sponsor"), Copelco Capital Funding Corp. XI, a limited-purpose Delaware
corporation ("Copelco Capital XI") and Copelco Capital, Inc. a Delaware
corporation ("Copelco Capital"), (the "Certificates", together with the Notes
and the Residual Notes, the "Securities"). Neither the Residual Notes nor the
Certificates are offered hereby.
The Notes will represent debt obligations of Copelco Capital Funding
Trust 1998-A, a Delaware business trust (the "Issuer"), formed pursuant to a
trust agreement, dated as of July 31, 1998 (the "Trust Agreement"), by and among
the Sponsor and Wilmington Trust Company, a Delaware banking corporation (in its
capacity as owner trustee of the Issuer, the "Owner Trustee"). The assets of the
Issuer securing the Notes will include a pool of healthcare, manufacturing and
business equipment leases, and all of its interest in the equipment underlying
the leases. The leases and the related interests in the equipment were
originated or acquired by Copelco Capital, as described herein, sold or
contributed by Copelco Capital to the Sponsor and, in turn, contributed by the
Sponsor to the Issuer pursuant to a sale and servicing agreement, dated as of
August 11, 1998 (the "Sales and Servicing Agreement"), by and among the Issuer,
Copelco Capital, as seller (in such capacity, the "Seller") and servicer (in
such capacity, the "Servicer"), the Sponsor and Manufacturers and Traders Trust
Company, a New York banking corporation, as indenture trustee (the "Indenture
Trustee") and pledged by the Issuer to the Indenture Trustee pursuant to an
indenture, dated as of August 1, 1998 (the "Indenture"), by and among the Issuer
and the Indenture Trustee.
Payments of principal and interest to the holders of the Class A Notes
(the "Class A Noteholders") will have the benefit of limited credit support
consisting of the subordination of the Class B Notes, the Class C Notes, the
Class D Notes, the Class E Notes and the Certificates, funds on deposit in the
Reserve Account (as defined herein) and amounts on deposit in certain other
accounts. The holders of the Class B Notes (the "Class B Noteholders") will have
the benefit of limited credit support in the form of the subordination of the
Class C Notes, the Class D Notes, the Class E Notes, and the Certificates, funds
on deposit in the Reserve Account and amounts on deposit in certain other
accounts. The holders of the Class C Notes (the "Class C Noteholders") will have
the benefit of limited credit support in the form of the subordination of the
Class D Notes, the Class E Notes and the Certificates, funds on deposit in the
Reserve Account and amounts on deposit in certain other accounts. The holders of
the Class D Notes (the "Class D Noteholders") will have the benefit of limited
credit support in the form of the subordination of the Class E Notes and the
Certificates, funds on deposit in the Reserve Account and amounts on deposit in
certain other accounts. The Class A Noteholders, the Class B Noteholders, the
Class C Noteholders and the Class D Noteholders are sometimes referred to herein
as the "Offered Noteholders". The Class E Notes and the Residual Notes are being
offered in a private placement and therefore are not being offered hereby. The
holders of the Class E Notes are sometimes referred to herein as the "Class E
Noteholders" (together with the Class A Noteholders, the Class B Noteholders,
the Class C Noteholders and the Class D Noteholders, the "Noteholders"), the
holders of the Residual Notes are sometimes referred to herein as the "Residual
Noteholders" and the holders of the Certificates are sometimes referred to
herein as the "Certificateholders". Capitalized terms used herein will have the
meanings ascribed to such terms herein. The pages on which terms are defined are
set forth on the Index of Terms contained herein.
Interest on the Offered Notes will be payable monthly in arrears on the
fifteenth day of the month (or the first business day thereafter) beginning on
August 17, 1998 (each, a "Payment Date") with respect to the period from and
including the immediately preceding Payment Date (or with respect to the Initial
Payment Date and the Class A-1 Notes, the Issuance Date, and with respect to the
Initial Payment Date and all Offered Notes other than the Class A-1 Notes, July
15, 1998) to the day prior to such current Payment Date. Principal payments with
respect to the Offered Notes will be payable on each Payment Date beginning on
August 17, 1998. The stated maturity date with respect to the Class A-1 Notes is
the Payment Date in August 1999 (the "Class A-1 Stated Maturity Date"), the
stated maturity date with respect to the Class A-2 Notes is the Payment Date in
August 2000 (the "Class A-2 Stated Maturity Date"), the stated maturity date
with respect to the Class A-3 Notes is the Payment Date in August 2001 (the
"Class A-3 Stated Maturity Date"), the stated maturity date with respect to the
Class A-4 Notes is the Payment Date in July 2003 (the "Class A-4 Stated Maturity
Date"), the stated maturity date with respect to the Class B Notes is the
Payment Date in February 2004 (the "Class B Stated Maturity Date"), the stated
maturity date with respect to the Class C Notes is the Payment Date in March
2004 (the "Class C Stated Maturity Date") and the stated maturity date with
respect to the Class D Notes is the Payment Date in April 2004 (the "Class D
Stated Maturity Date", together with the Class A-1 Stated Maturity Date, the
Class A-2 Stated Maturity Date, the Class A-3 Stated Maturity Date, the Class
A-4 Stated Maturity Date, the Class B Stated Maturity Date and the Class C
Stated Maturity Date, the "Stated Maturity Dates"). However, if all payments on
the Leases are made as scheduled, final payment with respect to the Offered
Notes would occur prior to stated maturity and it is expected that the Offered
Notes will mature prior to stated maturity. See "Prospectus Summary -- Expected
Maturity; Stated Maturity." In addition, should an Event of Default, an Early
Lease Termination or a Casualty (each, as described herein) occur, repayment of
principal on the Offered Notes may be earlier than would otherwise be the case.
The Issuer will have the option, subject to certain conditions, to
redeem all, but not less than all, of the Offered Notes and thereby cause early
repayment of the Offered Notes as of any Payment Date on which the Discounted
Present Value of the Performing Leases is less than or equal to 5% of the
Discounted Present Value of the Leases as of the Cut-Off Date (after giving
effect to the payment of principal on such Payment Date). The Issuer will give
notice of such redemption to each Offered Noteholder and the Indenture Trustee
at least 30 days before the Payment Date fixed for such prepayment. Upon deposit
of funds necessary to effect such redemption, the Indenture
2
<PAGE>
Trustee shall pay the remaining unpaid principal amount on the Offered Notes and
all accrued and unpaid interest as of the Payment Date fixed for redemption. See
"Description of the Notes--Redemption."
The Offered Notes offered hereby are being offered pursuant to this
Prospectus. Sales of the Offered Notes may not be consummated unless the
purchaser has received this Prospectus.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF
THE OFFERED NOTES OFFERED HEREBY, INCLUDING PURCHASES OF OFFERED NOTES TO
STABILIZE THE MARKET PRICE AND THE IMPOSITION OF BIDS. FOR A DESCRIPTION OF
THESE ACTIVITIES SEE "UNDERWRITING" HEREIN.
AVAILABLE INFORMATION
The Issuer has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (together with all amendments and
exhibits thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Offered Notes
offered pursuant to this Prospectus and described herein. For further
information, reference is made to the Registration Statement which may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549;
Citicorp Center, 500 West Madison, Suite 1400, Chicago, Illinois 60661 and Seven
World Trade Center, Suite 1300, New York, New York 10048. Copies of the
Registration Statement may be obtained from the Public Reference Branch of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a Web site at http://www.sec.gov pursuant to
Item 502(a) under Regulation S-K as recently amended in SEC Release No. 33-7289
(May 9, 1996). The Issuer will file with the Commission such periodic reports
with respect to the Trust as are required under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the rules and regulations of the
Commission thereunder.
REPORTS TO NOTEHOLDERS
During such time as the Offered Notes remain in book-entry form, any
quarterly and annual reports containing information concerning the Issuer and
the Offered Notes and required to be filed with the Commission will be sent to
Cede & Co. ("Cede"), as nominee of The Depository Trust Company ("DTC"), the
Euroclear System ("Euroclear") or Cedel Bank, S.A. ("CEDEL") as registered
holders of the Offered Notes pursuant to the Indenture. Such reports will be
made available by DTC, Euroclear or CEDEL and its participants to the Offered
Noteholders in accordance with the rules, regulations and procedures creating
and affecting DTC, Euroclear and CEDEL, respectively. See "Description of the
Notes--Book Entry Registration Notes." However, such reports will not be sent
directly to each beneficial owner while the Notes are in book-entry form. Upon
the issuance of fully registered, certificated Notes, such reports will be sent
directly to each Noteholder.
3
<PAGE>
PROSPECTUS SUMMARY
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus. A listing of pages on which
some of such terms are defined can be found in the "Index of Terms" herein.
Issuer........................ Copelco Capital Funding Trust 1998-A (the
"Issuer"), a Delaware business trust. The
Issuer has been formed pursuant to a trust
agreement, dated as of July 31, 1998 (the
"Trust Agreement"), by and among Copelco
Capital Funding LLC 98-1, a Delaware limited
liability company, as sponsor ("Copelco
Funding LLC" or the "Sponsor") and
Wilmington Trust Company, a Delaware banking
corporation (in its capacity as owner
trustee of the Issuer, the "Owner Trustee").
The Issuer will have no significant assets
other than the Trust Fund (as described
below). The Issuer's offices are located at
Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001.
Securities Offered............ $194,662,668 aggregate principal amount of
5.680% Class A-1 Lease-Backed Notes, Series
1998-A, (the "Class A-1 Notes"), $92,208,632
aggregate principal amount of 5.780% Class
A-2 Lease-Backed Notes, Series 1998-A (the
"Class A-2 Notes"), $148,558,352 aggregate
principal amount of 5.780% Class A-3
Lease-Backed Notes, Series 1998-A (the
"Class A-3 Notes"), and $162,218,890
aggregate principal amount of 5.920% Class
A-4 Lease-Backed Notes, Series 1998-A (the
"Class A-4 Notes", together with the Class
A-1 Notes, Class A-2 Notes and Class A-3
Notes, the "Class A Notes"), $17,075,673
aggregate principal amount of 5.940% Class B
Lease-Backed Notes, Series 1998-A (the
"Class B Notes"), $13,660,538 aggregate
principal amount of 6.010% Class C
Lease-Backed Notes, Series 1998-A (the
"Class C Notes") and $20,490,807 aggregate
principal amount of 6.330% Class D
Lease-Backed Notes, Series 1998-A (the
"Class D Notes", together with the Class A
Notes, the Class B Notes and the Class C
Notes, the "Offered Notes"). The Class A-1
Notes will be an "eligible security" within
the meaning of Rule 2a-7 promulgated under
the Investment Company Act of 1940, as
amended. In addition, the Issuer will issue,
through a private placement, (i) $20,490,807
aggregate principal amount of 7.550% Class E
Notes (the "Class E Notes", together with
the Offered Notes, the "Notes") (ii) one or
more classes of Residual Notes and (iii) one
or more classes of Certificates (all of
which Certificates will be initially held by
the Sponsor, Copelco Capital and Copelco
Capital XI).
The combined aggregate principal amount of
the Class A Notes, the Class B Notes, the
Class C Notes, the Class D Notes and the
Class E Notes will comprise the initial
principal amount (the "Initial Principal
Amount") of the Notes. The aggregate
principal amounts of the Class A Notes, the
Class B Notes, the Class C Notes, the Class
D Notes and the Class E Notes set forth
herein are based upon the Discounted Present
Value of the Leases (as defined herein) as
of the close of business on June 30, 1998
(the "Cut-Off Date") calculated at the
Discount Rate (defined herein).
Issuance Date................. On or about August 11, 1998.
Denominations................. The Offered Notes will be issued in minimum
denominations of $1,000 and integral
multiples of $1,000 in excess thereof,
except that one Class A Note, Class B Note,
Class C Notes and Class D Note may be issued
in another denomination.
4
<PAGE>
Interest Rate................. 5.680% per annum on the Class A-1 Notes (the
"Class A-1 Interest Rate") calculated on the
basis of a year of 360 days and the actual
number of days in such Interest Accrual
Period, 5.780% per annum on the Class A-2
Notes (the "Class A-2 Interest Rate"),
5.780% per annum on the Class A-3 Notes (the
"Class A-3 Interest Rate"), 5.920% per annum
on the Class A-4 Notes (the "Class A-4
Interest Rate"), 5.940% per annum on the
Class B Notes (the "Class B Interest Rate")
, 6.010% per annum on the Class C Notes (the
"Class C Interest Rate"), 6.330% per annum
on the Class D Notes (the "Class D Interest
Rate") and 7.550% per annum on the Class E
Notes (the "Class E Interest Rate"),
calculated on the basis of a year of 360
days comprised of twelve 30-day months. With
respect to any particular Class, the
"Interest Rate" refers to the applicable
rate indicated in the immediately preceding
sentence.
Initial Principal Amount...... $194,662,668 for the Class A-1 Notes (the
"Class A-1 Initial Principal Amount"),
$92,208,632 for the Class A-2 Notes (the
"Class A-2 Initial Principal Amount"),
$148,558,352 for the Class A-3 Notes (the
"Class A-3 Initial Principal Amount"),
$162,218,890 for the Class A-4 Notes (the
"Class A-4 Initial Principal Amount",
together with the Class A-1 Initial
Principal Amount, Class A-2 Initial
Principal Amount, and the Class A-3 Initial
Principal Amount, the "Class A Initial
Principal Amount"), $17,075,673 for the
Class B Notes (the "Class B Initial
Principal Amount"), $13,660,538 for the
Class C Notes (the "Class C Initial
Principal Amount"), $20,490,807 for the
Class D Notes (the "Class D Initial
Principal Amount") and $20,490,807 for the
Class E Notes (the "Class E Initial
Principal Amount"). See "Description of the
Notes."
Discounted Present Value of
the Leases................ The Discounted Present Value of the Leases
(the "Discounted Present Value of the
Leases"), at any given time, shall equal the
future remaining scheduled payments (not
including delinquent amounts, Excess Copy
Charges, Maintenance Charges and Fee Per
Scan Charges (defined below)) from the
Leases (including Non-Performing Leases),
discounted at a rate equal to 6.689% (the
"Discount Rate"), which rate is equal to the
sum of (a) the weighted average Interest
Rate of the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class A-4
Notes, the Class B Notes, the Class C Notes,
the Class D Notes and the Class E Notes each
weighted by (i) the Class A-1 Initial
Principal Amount, the Class A-2 Initial
Principal Amount, the Class A-3 Initial
Principal Amount, the Class A-4 Initial
Principal Amount, the Class B Initial
Principal Amount, the Class C Initial
Principal Amount, the Class D Initial
Principal Amount or the Class E Initial
Principal Amount, as applicable, and (ii)
the expected weighted average life (under a
zero prepayment, and no loss scenario) of
each Class of Notes, as applicable and (b)
the Servicing Fee Rate of 0.75% per annum.
The "Discounted Present Value of the
Performing Leases" equals the Discounted
Present Value of the Leases, reduced by all
future remaining scheduled payments on the
Non-Performing Leases (not including
delinquent amounts, Excess Copy Charges,
Maintenance Charges or Fee Per Scan
Charges), discounted at the Discount Rate.
See "Description of the Notes--General."
Each of the Indenture and the Sales and
Servicing Agreement will provide that any
calculation of future remaining scheduled
payments made on a Determination Date or
with respect to a Payment Date will be
calculated after giving effect to any
payments received prior to such date of
calculation to the extent such payments
relate to scheduled payments due and payable
by the Lessees with respect to the related
Due Period (defined herein) and all prior
Due Periods. "Statistical Discounted Present
Value of the Leases" means an amount equal
to the future remaining scheduled payments
(not including delinquent amounts, Excess
Copy Charges, Maintenance Charges and Fee
Per Scan Charges) from the Leases as of the
Cut-Off Date, discounted at a
5
<PAGE>
rate equal to 6.75% (the "Statistical
Discount Rate"). The Statistical Discounted
Present Value of the Leases as of the
Cut-Off Date is $682,296,520.78 and will not
vary materially from the Discounted Present
Value of the Leases as of the Cut-Off Date.
See "The Series Pool--The Equipment." The
aggregate Discounted Present Value of the
Leases as of the Cut-Off Date, calculated at
the Discount Rate is $683,026,904.22.
"Non-Performing Leases" are (a) Leases that
have become more than 123 days delinquent or
(b) Leases that have been accelerated by the
Servicer or Leases that the Servicer has
determined to be uncollectible in accordance
with its customary practices. See "The
Series Pool--The Leases." The Seller will
represent in the Sales and Servicing
Agreement that at the time of transfer of
any Lease to the Issuer, such Lease was not
a Non-Performing Lease.
Expected Maturity; Stated
Maturity.................. The expected maturity dates with respect to
the Class A-1 Notes, Class A-2 Notes, Class
A-3 Notes, Class A-4 Notes are the Payment
Dates on July 1999, February 2000, February
2001 and January 2003, respectively. The
expected maturity date with respect to the
Class B Notes, Class C Notes and Class D
Notes are the Payment Dates on February
2003, March 2003 and April 2003,
respectively. The stated maturity date with
respect to the Class A-1 Notes is the
Payment Date in August 1999 (the "Class A-1
Stated Maturity Date"), the stated maturity
date with respect to the Class A-2 Notes is
the Payment Date in August 2000 (the "Class
A-2 Stated Maturity Date"), the stated
maturity date with respect to the Class A-3
Notes is the Payment Date in August 2001
(the "Class A-3 Stated Maturity Date"), the
stated maturity date with respect to Class
the A-4 Notes is the Payment Date in July
2003 (the "Class A-4 Stated Maturity Date"),
the stated maturity date with respect to the
Class B Notes is the Payment Date in
February 2004 (the "Class B Stated Maturity
Date"), the stated maturity date with
respect to the Class C Notes is the Payment
Date in March 2004 (the "Class C Stated
Maturity Date") and the stated maturity date
with respect to the Class D Notes is the
Payment Date in April 2004 (the "Class D
Stated Maturity Date", together with the
Class A-1 Stated Maturity Date, the Class
A-2 Stated Maturity Date, the Class A-3
Stated Maturity Date, the Class A-4 Stated
Maturity Date, the Class B Stated Maturity
Date and the Class C Stated Maturity Date,
the "Stated Maturity Dates"). However, if
all payments on the Leases are made as
scheduled, final payment with respect to the
Notes would occur prior to stated maturity.
The Notes..................... The Notes will represent obligations solely
of the Issuer and are secured by the Trust
Fund.
Seller and Servicer........... Copelco Capital, Inc., a Delaware
corporation ("Copelco Capital", in its
capacity as seller, the "Seller", and in its
capacity as servicer, the "Servicer").
Copelco Capital will enter into a sales and
servicing agreement (the "Sales and
Servicing Agreement") with the Issuer and
the Sponsor to service the Leases included
in the Series Pool (as defined herein) and
make Servicer Advances (as defined herein).
Pursuant to the Sale and Servicing
Agreement, Copelco Capital will sell to the
Sponsor all of its right, title and interest
in the Leases. In addition, Copelco Capital
will concurrently transfer to the Sponsor
all of its right, title and interest in the
related Equipment (which is either an
ownership interest or security interest)
which shall constitute a contribution of
capital. Contemporaneously with the sale,
transfer and conveyance by Copelco Capital
to the Sponsor of the Leases and related
Equipment, the Sponsor will transfer its
right, interest and title of the Leases and
related Equipment to the Issuer pursuant to
the Sale and Servicing Agreement and the
Issuer will thereby
6
<PAGE>
pledge the Leases and related Equipment to
the Indenture Trustee pursuant to the
Indenture.
Trust Fund.................... The "Trust Fund" will consist of a pool (the
"Series Pool") of healthcare, manufacturing
and business equipment lease contracts (the
"Lease Contracts"), including payments due
thereunder (the "Lease Receivables" together
with the Lease Contracts, the "Leases") and
interest in the related leased equipment
(the "Equipment") transferred by the Sponsor
to the Issuer. In addition, the Trust Fund
will include the funds on deposit in the
Reserve Account.
Indenture Trustee............. Manufacturers and Traders Trust Company (the
"Indenture Trustee"). The Indenture
Trustee's offices are located at One M&T
Plaza, 7th Floor, Buffalo, New York 14203.
Determination Date............ The fifth day prior to each Payment Date (or
the preceding business day, if such day is
not a business day). On such date (each, a
"Determination Date"), the Servicer will
determine the amount of payments received on
the Leases in respect of the immediately
preceding calendar month (each such period,
a "Due Period") which will be available for
distribution on the Payment Date. See
"Description of the Notes--Distributions on
Notes."
Payment Date.................. Payments on the Notes will be made on the
fifteenth day of each month (or if such day
is not a business day, the next succeeding
business day), commencing on August 17, 1998
(each, a "Payment Date"), to holders of
record on the last day of the immediately
preceding calendar month (each, a "Record
Date"). See "Description of the
Notes--Distributions on Notes."
Interest Payments............. On each Payment Date, the interest due (the
"Interest Payments") with respect to the
Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes, the
Class B Notes, the Class C Notes, the Class
D Notes and the Class E Notes since the last
Payment Date will be the interest that has
accrued on such Notes since the last Payment
Date (or in the case of the first Payment
Date, with respect to the Class A-1 Notes,
since the Issuance Date, and with respect to
all other Notes, since July 15, 1998) (the
"Interest Accrual Period") at the applicable
Interest Rate applied to the then unpaid
principal amounts (the "Outstanding
Principal Amounts") of the Class A-1 Notes,
the Class A-2 Notes, the Class A-3 Notes,
the Class A-4 Notes, the Class B Notes, the
Class C Notes, the Class D Notes, and the
Class E Notes, respectively, after giving
effect to payments of principal to the Class
A-1 Noteholders, the Class A-2 Noteholders,
the Class A-3 Noteholders, the Class A-4
Noteholders, the Class B Noteholders, the
Class C Noteholders, the Class D Noteholders
and the Class E Noteholders, respectively,
on the preceding Payment Date. See
"Description of the Notes--General" and
"Distributions on Notes."
Principal Payments............ For each Payment Date, each of the Class A
Noteholders, the Class B Noteholders, the
Class C Noteholders, the Class D Noteholders
and the Class E Noteholders will be entitled
to receive payments of principal ("Principal
Payments"), to the extent funds are
available therefor, in the priorities set
forth in the Indenture and described herein
below and under "Application of Payments"
and "Description of the Notes--Distributions
on Notes." On each Payment Date, to the
extent funds are available therefor, the
Principal Payment will be paid to the
Noteholders in the following priority: (a)
(i) to the Class A-1 Noteholders only, until
the Outstanding Principal Amount on the
Class A-1 Notes has been reduced to zero,
the Class A Principal Payment, then (ii) to
the Class A-2 Noteholders only, until the
Outstanding Principal Amount on the Class
A-2 Notes has been reduced to zero, the
Class A Principal Payment, then
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<PAGE>
(iii) to the Class A-3 Noteholders only,
until the Outstanding Principal Amount on
the Class A-3 Notes has been reduced to
zero, the Class A Principal Payment, and
(iv) to the Class A-4 Noteholders, until the
Outstanding Principal Amount on the Class
A-4 Notes has been reduced to zero, the
Class A Principal Payment, (b) to the Class
B Noteholders, the Class B Principal
Payment, (c) to the Class C Noteholders, the
Class C Principal Payment, (d) to the Class
D Noteholders, the Class D Principal
Payment, (e) to the Class E Noteholders, the
Class E Principal Payment and (f) to the
extent that the Class B Floor exceeds the
Class B Target Investor Principal Amount,
the Class C Floor exceeds the Class C Target
Investor Principal Amount, the Class D Floor
exceeds the Class D Target Investor
Principal Amount and/or the Class E Floor
exceeds the Class E Target Investor
Principal Amount, Additional Principal
(defined below) shall be distributed,
sequentially, as an additional principal
payment on the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes, the
Class B Notes, the Class C Notes, the Class
D Notes and the Class E Notes as applicable,
until the Outstanding Principal Amount of
each Class has been reduced to zero.
The "Class A Principal Payment" shall equal
(a) while the Class A-1 Notes are
outstanding, (i) on all Payment Dates prior
to the August 1999 Payment Date, the lesser
of (1) the amount necessary to reduce the
Outstanding Principal Amount on the Class
A-1 Notes to zero and (2) the difference
between (A) the Discounted Present Value of
the Performing Leases as of the previous
Determination Date and (B) the Discounted
Present Value of the Performing Leases as of
the related Determination Date, and (ii) on
and after the August 1999 Payment Date, the
entire Outstanding Principal Amount on the
Class A-1 Notes and (b) after the Class A-1
Notes have been paid in full, the amount
necessary to reduce the aggregate
Outstanding Principal Amount on the Class A
Notes to the Class A Target Investor
Principal Amount (as defined below).
The "Class B Principal Payment" shall equal
(a) while the Class A-1 Notes are
outstanding, zero and (b) after the
Outstanding Principal Amount on the Class
A-1 Notes has been reduced to zero, the
amount necessary to reduce the Outstanding
Principal Amount of the Class B Notes to the
greater of the Class B Target Investor
Principal Amount and the Class B Floor.
The "Class C Principal Payment" shall equal
(a) while the Class A-1 Notes are
outstanding, zero and (b) after the
Outstanding Principal Amount on the Class
A-1 Notes has been reduced to zero, the
amount necessary to reduce the Outstanding
Principal Amount of the Class C Notes to the
greater of the Class C Target Investor
Principal Amount and the Class C Floor.
The "Class D Principal Payment" shall equal
(a) while the Class A-1 Notes are
outstanding, zero and (b) after the
Outstanding Principal Amount on the Class
A-1 Notes has been reduced to zero, the
amount necessary to reduce the Outstanding
Principal Amount of the Class D Notes to the
greater of the Class D Target Investor
Principal Amount and the Class D Floor.
The "Class E Principal Payment" shall equal
(a) while the Class A-1 Notes are
outstanding, zero and (b) after the
Outstanding Principal Amount on the Class
A-1 Notes has been reduced to zero, the
amount necessary to reduce the Outstanding
Principal Amount of the Class E Notes to the
greater of the Class E Target Investor
Principal Amount and the Class E Floor.
8
<PAGE>
The "Class A Target Investor Principal
Amount" with respect to each Payment Date is
an amount equal to the product of (a) the
Class A Percentage and (b) the Discounted
Present Value of the Performing Leases as of
the related Determination Date.
The "Class B Target Investor Principal
Amount" with respect to each Payment Date is
an amount equal to the product of (a) the
Class B Percentage and (b) the Discounted
Present Value of the Performing Leases as of
the related Determination Date.
The "Class C Target Investor Principal
Amount" with respect to each Payment Date is
an amount equal to the product of (a) the
Class C Percentage and (b) the Discounted
Present Value of the Performing Leases as of
the related Determination Date.
The "Class D Target Investor Principal
Amount" with respect to each Payment Date is
an amount equal to the product of (a) the
Class D Percentage and (b) the Discounted
Present Value of the Performing Leases as of
the related Determination Date.
The "Class E Target Investor Principal
Amount" (the Class A Target Investor
Principal Amount, the Class B Target
Investor Principal Amount, the Class C
Target Investor Principal Amount, the Class
D Target Investor Principal Amount and the
Class E Target Investor Principal Amount,
collectively, the "Class Target Investor
Principal Amounts") with respect to each
Payment Date is an amount equal to the
product of (a) the Class E Percentage and
(b) the Discounted Present Value of the
Performing Leases as of the related
Determination Date.
The "Class A Percentage" will be equal
approximately to 82.5175%. The "Class B
Percentage" will be equal approximately to
3.4965%. The "Class C Percentage" will be
equal approximately to 2.7972%. The "Class D
Percentage" will be equal approximately to
4.1958%. The "Class E Percentage" will be
equal approximately to 4.1958%.
The "Class B Floor" with respect to each
Payment Date means (a) 2.7% of the initial
Discounted Present Value of the Leases as of
the Cut-Off Date, plus (b) the Cumulative
Loss Amount with respect to such Payment
Date, minus (c) the sum of the Outstanding
Principal Amount of the Class C Notes, the
Outstanding Principal Amount of the Class D
Notes, the Outstanding Principal Amount of
the Class E Notes, and the
Overcollateralization Balance as of the
immediately preceding Payment Date after
giving effect to all principal payments made
on that day, minus (d) the amount on deposit
in the Reserve Account after giving effect
to withdrawals to be made on such Payment
Date.
The "Class C Floor" with respect to each
Payment Date means (a) 2.2% of the initial
Discounted Present Value of the Leases as of
the Cut-Off Date, plus (b) the Cumulative
Loss Amount with respect to such Payment
Date, minus (c) the sum of the Outstanding
Principal Amount of the Class D Notes, the
Outstanding Principal Amount of the Class E
Notes, and the Overcollateralization Balance
as of the immediately preceding Payment Date
after giving effect to all principal
payments made on that day, minus (d) the
amount on deposit in the Reserve Account
after giving effect to withdrawals to be
made on such Payment Date; provided,
however, that if the Outstanding Principal
Amount of the Class B Notes is less than or
equal to the Class B Floor on such Payment
Date, the Class C Floor will equal the
Outstanding Principal
9
<PAGE>
Amount of the Class C Notes utilized in the
calculation of the Class B Floor for such
Payment Date.
The "Class D Floor" with respect to each
Payment Date means (a) 1.8% of the initial
Discounted Present Value of the Leases as of
the Cut-Off Date, plus (b) the Cumulative
Loss Amount with respect to such Payment
Date, minus (c) the sum of the Outstanding
Principal Amount of the Class E Notes, and
the Overcollateralization Balance as of the
immediately preceding Payment Date after
giving effect to all principal payments made
on that day, minus (d) the amount on deposit
in the Reserve Account after giving effect
to withdrawals to be made on such Payment
Date; provided, however, that if the
Outstanding Principal Amount of the Class C
Notes is less than or equal to the Class C
Floor on such Payment Date, the Class D
Floor will equal the Outstanding Principal
Amount of the Class D Notes utilized in the
calculation of the Class C Floor for such
Payment Date.
The "Class E Floor" (the Class B Floor, the
Class C Floor, the Class D Floor and the
Class E Floor, collectively, the "Class
Floors") with respect to each Payment Date
means (a) 1.2% of the initial Discounted
Present Value of the Leases as of the
Cut-Off Date, plus (b) the Cumulative Loss
Amount with respect to such Payment Date,
minus (c) the Overcollateralization Balance
as of the immediately preceding Payment Date
after giving effect to all principal
payments made on that day, minus (d) the
amount on deposit in the Reserve Account
after giving effect to withdrawals to be
made on such Payment Date; provided,
however, that if the Outstanding Principal
Amount of the Class D Notes is less than or
equal to the Class D Floor on such Payment
Date, the Class E Floor will equal the
Outstanding Principal Amount of the Class E
Notes utilized in the calculation of the
Class D Floor for such Payment Date.
"Additional Principal" with respect to each
Payment Date equals (a) zero if each of the
Class Target Investor Principal Amounts for
Classes B, C, D and E exceed their
respective Class Floors on such Payment Date
and (b) in each other case the excess, if
any, of (i)(A) the Outstanding Principal
Balance of the Notes plus the
Overcollateralization Balance as of the
immediately preceding Payment Date after
giving effect to payments on such Payment
Date, minus (B) the Discounted Present Value
of the Performing Leases as of the related
Determination Date, over (ii) the sum of the
Class A Principal Payment, the Class B
Principal Payment, the Class C Principal
Payment, the Class D Principal Payment and
the Class E Principal Payment to be paid on
such Payment Date.
The "Overcollateralization Balance" with
respect to each Payment Date is an amount
equal to the excess, if any, of (a) the
Discounted Present Value of Performing
Leases as of the related Determination Date
over (b) the Outstanding Principal Amount of
the Notes as of such Payment Date after
giving effect to all principal payments made
on that day.
The "Cumulative Loss Amount" with respect to
each Payment Date is an amount equal to the
excess, if any, of (a) the total of (i) the
Outstanding Principal Amount of the Notes as
of the immediately preceding Payment Date
after giving effect to all principal
payments made on that day, plus (ii) the
Overcollateralization Balance as of the
immediately preceding Payment Date, minus
(iii) the lesser of (A) the Discounted
Present Value of the Performing Leases as of
the Determination Date relating to the
immediately preceding
10
<PAGE>
Payment Date minus the Discounted Present
Value of the Performing Leases as of the
related Determination Date and (B) Available
Funds remaining after the payment of amounts
owing the Servicer and in respect of
interest on the Notes on such Payment Date,
over (b) the Discounted Present Value of the
Performing Leases as of the related
Determination Date.
The Series Pool............... The Series Pool will consist of the Leases
as of the Cut-Off Date, plus any Substitute
Leases (as defined herein) and any
Additional Leases (as defined herein)
excluding any Leases which have been
replaced by one or more Additional Leases or
Substitute Leases and, the interest of the
Issuer in the related Equipment. See "The
Series Pool" and "Certain Legal Matters
Affecting a Lessee's Rights and
Obligations." Copelco Capital will represent
and warrant that, as of the Cut-Off Date,
all Leases were current or less than 63 days
delinquent and that, as of the initial
Determination Date, the Lessees have made at
least one lease payment.
Equipment..................... The Equipment is comprised primarily of
office products such as copiers and
facsimile machines, computer systems for
healthcare professionals, medical diagnostic
and examination equipment for radiology,
nuclear medicine, ultrasound and laboratory
analysis, industrial and business equipment
such as machine tools, graphic arts
equipment, electronics testing equipment,
and computers for businesses. As of the
Cut-Off Date, the Series Pool had
approximately 64 equipment categories.
Lessees....................... Primarily hospitals, non-hospital medical
facilities, physicians, businesses and
individual business owners (each, a
"Lessee," and collectively, the "Lessees").
As of the Cut-Off Date, the Series Pool
included 48,869 separate Leases. As of the
Cut-Off Date, Leases relating to Lessees in
any one state did not account for more than
17.7% of the Statistical Discounted Present
Value of the Leases. See "The Series
Pool--The Leases."
Certain Lease Terms........... The Leases are triple-net leases, requiring
the Lessee to pay all taxes, maintenance and
insurance associated with the Equipment. The
Leases are non-cancelable by the Lessees.
All payments under the Leases are absolute,
unconditional obligations of the Lessees
without right of offset for any reason. Each
Lessee entered into its Lease for specified
Equipment designated in schedules
incorporated into the Lease. The schedules,
among other things, establish the payments
and the term of the Lease with respect to
such Equipment. The Leases have remaining
terms to maturity, calculated as of the
Cut-Off Date, of between approximately 2 and
82 months and a weighted average remaining
term to maturity of 43.2 months. See "The
Series Pool--The Leases." The Leases had
original terms to maturity of between
approximately 9 and 88 months and a weighted
average original term to maturity of 51.0
months.
Additions, Substitutions and
Adjustments............... Although the Leases will be non-cancelable
by the Lessees, Copelco Capital has, from
time to time, permitted early termination by
Lessees ("Early Lease Termination") or other
modifications of the lease terms in certain
circumstances more fully specified in the
Sales and Servicing Agreement, including,
without limitation, in connection with a
full or partial buy-out or equipment
upgrade.
11
<PAGE>
In the event of an Early Lease Termination
which has been prepaid in full or in part,
the Issuer will have the option to reinvest
the proceeds of such Early Termination Lease
in one or more Leases having similar
characteristics to such terminated Lease
(each, an "Additional Lease").
In addition, Copelco Capital will have the
option to substitute one or more leases
having similar characteristics (each, a
"Substitute Lease") for (a) Non-Performing
Leases, (b) Leases subject to repurchase as
a result of a breach of representation and
warranty (each a "Warranty Lease") and (c)
Leases following a modification or
adjustment to the terms of such Lease (each,
an "Adjusted Lease"). The aggregate
Discounted Present Value of the
Non-Performing Leases for which Copelco
Capital may substitute Substitute Leases is
limited to an amount not in excess of 10% of
the aggregate Discounted Present Value of
the Leases as of the Cut-Off Date. The
aggregate Discounted Present Value of
Adjusted Leases and Warranty Leases for
which Copelco Capital may substitute
Substitute Leases is limited to an amount
not in excess of 10% of the aggregate
Discounted Present Value of the Leases as of
the Cut-Off Date.
The terms of a Lease may be modified or
adjusted for administrative reasons or at
the request of the lessee, vendor or lessor
due to a variety of circumstances, including
changes to the delivery date of equipment,
the cost of equipment, the components of
leased equipment or to correct information
when a Lease is entered into Copelco
Capital's servicing system. Such
modifications may result in adjustments to
the lease commencement date, the monthly
payment date, the amount of the monthly
payment or the equipment subject to a Lease.
Additional Leases and Substitute Leases will
be originated using the same credit criteria
as the initial Leases. To the extent
material, information with respect to such
Additional or Substitute Leases will be
included in periodic reports filed with the
Commission as are required under the
Exchange Act.
In no event will the aggregate scheduled
payments of the Leases, after the inclusion
of the Substitute Leases and Additional
Leases be materially less than the aggregate
scheduled payments of the Leases prior to
such substitution or reinvestment.
Additionally, either the final payment on
such Substitute Lease or Additional Lease
will be on or prior to May 2005.
In the event that an Early Lease Termination
is allowed by Copelco Capital and an
Additional Lease is not provided, the amount
prepaid will be equal to at least the
Discounted Present Value of the terminated
Lease, plus any delinquent payments. See
"The Series Pool--The Leases."
Payments on Leases............ All payments on Leases will be made by the
Lessees to the address specified by the
Servicer. The Servicer will deposit the
proceeds of such payments to the Collection
Account (as defined herein) within two
Business Days of the receipt thereof. See
"Description of the Notes--Collection
Account."
Advances by Servicer.......... Prior to any Payment Date, the Servicer may,
but will not be required to, advance (each,
a "Servicer Advance") to the Indenture
Trustee, an amount sufficient to cover
delinquencies on Leases in the Trust Fund
with respect to the prior Due Period. The
Servicer will be reimbursed for Servicer
Advances not recovered from late payments
from Available Funds on the Payment Date
following the date on which the Servicer
determined such Lease to be a Non-Performing
Lease. See "Description of the
Notes--Advances by Servicer."
12
<PAGE>
Servicing Fee................. A Servicing Fee (the "Servicing Fee"), will
be paid monthly to the Servicer on each
Payment Date with respect to the Notes from
amounts in the Collection Account and will
be calculated by multiplying one-twelfth of
0.75% times the Discounted Present Value of
the Performing Leases, as of the prior
Payment Date.
The Servicing Fee will be paid to the
Servicer for servicing the Series Pool and
to pay certain administrative expenses in
connection with the Notes, including
Indenture Trustee fees, Owner Trustee fees
and expenses. See "Copelco Capital's
Underwriting and Servicing Practices."
Use of Proceeds............... The net proceeds from the sale of the
Offered Notes will be distributed to the
holders of Certificates and primarily used
to purchase the Leases from Copelco Capital.
In addition, the net proceeds from the
private placement of the Class E Notes and
the Residual Notes will be used for the same
purpose. Copelco Capital will use such
amounts to repay bank indebtedness and for
general corporate purposes.
The Indenture................. The Notes and the Residual Notes are to be
issued pursuant to, and are to be in such
form, bear interest and be payable on such
terms as are prescribed in an indenture (the
"Indenture") to be executed between the
Issuer and the Indenture Trustee.
Available Funds............... On each Payment Date, the Indenture Trustee
will use such funds to make required
payments of principal and interest to
Noteholders.
Funds received on or prior to the related
Determination Date ("Available Funds") will
be available for distribution by the
Indenture Trustee on a Payment Date and will
include:
a) Lease Payments due during the
prior Due Period (net of any Excess Copy
Charges, Maintenance Charges and Fee Per
Scan Charges);
b) recoveries from Non-Performing
Leases to the extent Copelco Capital has not
substituted Substitute Leases for such
Non-Performing Leases (except to the extent
required to reimburse unreimbursed Servicer
Advances);
c) late charges received on
delinquent Lease payments not advanced by
the Servicer;
d) proceeds from repurchases by
Copelco Capital of Leases as a result of
breaches of representations and warranties
to the extent Copelco Capital has not
substituted Substitute Leases for such
Leases other than Residual Warranty Payments
(as defined herein).
e) proceeds from investment of
funds in the Collection Account and the
Reserve Account, if any;
f) Casualty Payments other than
Residual Casualty Payments (as defined
herein);
g) Servicer Advances;
13
<PAGE>
h) Termination Payments other than
Residual Prepayments (as defined herein) to
the extent the Issuer does not reinvest such
Termination Payments in Additional Leases;
i) to the extent there occurs an
Available Funds Shortfall, funds, if any, on
deposit in the Reserve Account.
Available Funds will not include Residual
Realizations. "Residual Realizations" means
(a) cash flows realized from the sale or
release of the Equipment following the
expiration dates of the Leases, other than
Equipment subject to Non-Performing Leases,
(b) Residual Warranty Payments, (c) Residual
Casualty Payments and (d) Residual
Prepayments.
"Residual Casualty Payments" means, at any
date with respect to a Lease, the excess of
(a) the Casualty Payment related to the
Lease over (b) the Discounted Present Value
of the remaining Lease Payments related to
the Lease as of the immediately following
Payment Date (plus any amounts previously
due and unpaid).
"Residual Prepayments" means, at any date
with respect to a Terminated Lease, the
excess of (a) the payment related to the
Terminated Lease over (b) the Discounted
Present Value of the remaining Lease
Payments of the Terminated Lease as of the
immediately following Payment Date (plus any
amounts previously due and unpaid).
"Residual Warranty Payments" means, at any
date with respect to a Warranty Lease, the
excess of (a) the repurchase price related
to the Warranty Lease over (b) the
Discounted Present Value of the remaining
Lease Payments related to the Warranty Lease
as of the immediately following Payment Date
(plus any amounts previously due and
unpaid).
Application of Payments....... Monthly distributions will be made by the
Indenture Trustee from Available Funds in
the following priority:
a) to pay the Servicing Fee;
b) to reimburse unreimbursed Servicer
Advances in respect of a prior
Payment Date;
c) to make Interest Payments owing on
the Class A Notes concurrently to
the Class A-1 Noteholders, Class
A-2 Noteholders, Class A-3
Noteholders and Class A-4
Noteholders;
d) to make Interest Payments owing on
the Class B Notes;
e) to make Interest Payments owing on
the Class C Notes;
f) to make Interest Payments owing on
the Class D Notes;
g) to make Interest Payments owing on
the Class E Notes
h) to make the Class A Principal
Payment (i) to the Class A-1
Noteholders only, until the
Outstanding Principal Amount on the
Class A-1 Notes is reduced to zero,
then (ii) to the Class A-2
Noteholders only, until the
Outstanding Principal Amount on the
Class A-2 Notes is reduced to zero,
14
<PAGE>
then (iii) to the Class A-3
Noteholders only, until the
Outstanding Principal Amount on the
Class A-3 Notes is reduced to zero
and finally, (iv) to the Class A-4
Noteholders until the Outstanding
Principal Amount on the Class A-4
Notes is reduced to zero;
i) to make the Class B Principal
Payment;
j) to make the Class C Principal
Payment;
k) to make the Class D Principal
Payment;
l) to make the Class E Principal
Payment;
m) to pay the Additional Principal, if
any, to the Class A Noteholders
then receiving the Class A
Principal Payment as provided in
clause (h) above until the
Outstanding Principal Amount on all
of the Class A Notes has been
reduced to zero, then to the Class
B Noteholders until the Outstanding
Principal Amount on the Class B
Notes has been reduced to zero,
then to the Class C Noteholders
until the Outstanding Principal
Amount on the Class C Notes has
been reduced to zero, then to the
Class D Noteholders until the
Outstanding Principal Amount on the
Class D Notes has been reduced to
zero, thereafter to the Class E
Noteholders until the Outstanding
Principal Amount on the Class E
Notes has been reduced to zero;
n) to the Reserve Account, an amount
equal to the excess of the Required
Reserve Amount over the Available
Reserve Amount; and
o) to the Issuer, the balance, if any.
See "Description of the Notes--Distribution
on Notes."
Redemption.................... The Issuer will have the option, subject to
certain conditions, to redeem all, but not
less than all, of the Notes and thereby
cause early repayment of the Notes as of any
Payment Date on which the Discounted Present
Value of the Performing Leases is less than
or equal to 5% of the Discounted Present
Value of the Leases as of the Cut-Off Date
(after giving effect to the payment of
principal on such Payment Date). The Issuer
will give notice of such redemption to each
Noteholder and the Indenture Trustee at
least 30 days before the Payment Date fixed
for such prepayment. Upon deposit of funds
necessary to effect such redemption, the
Indenture Trustee shall pay the remaining
unpaid principal amount on the Notes and all
accrued and unpaid interest as of the
Payment Date fixed for redemption. See
"Description of the Notes--Redemption."
Subordination................. The Class A Notes will be paid sequentially
in accordance with the provisions of the
Indenture and as described in clause (h)
under "Application of Payments." The Class A
Notes will be senior in right of payment to
the Class B Notes, the Class B Notes will be
senior in right to the Class C Notes, the
Class C Notes will be senior in right to the
Class D Notes and the Class D Notes will be
senior in right to the Class E Notes to the
extent described herein. See "Description of
the Notes--Distributions on Notes." Except
following an Event of Default, the Residual
Notes are not subordinated to the Notes and
have senior rights with respect to Residual
Realizations. The Notes will have no rights
with respect to Residual Realizations.
15
<PAGE>
Reserve Account............... The Noteholders will have the benefit of
funds on deposit in an account (the "Reserve
Account") to the extent that there is a
shortfall in the amount available to pay
amounts owing the Servicer and to make
interest and principal payments on the
Notes, on any Payment Date. The Reserve
Account will be funded by an initial deposit
of 1.00% of the Discounted Present Value of
the Leases as of the Cut-Off Date.
Thereafter, to the extent provided in the
Indenture, additional deposits will be made
to the Reserve Account to the extent that
the amount on deposit in the Reserve Account
(the "Available Reserve Amount") is less
than the Required Reserve Amount. The
"Required Reserve Amount" equals the lesser
of (a) 1.00% of the Discounted Present Value
of the Leases as of the Cut-Off Date and (b)
the Outstanding Principal Amount of the
Notes. Amounts on deposit in the Reserve
Account in excess of the Required Reserve
Amount will be disbursed to the Issuer in
accordance with the provisions of the
Indenture.
Residual Realizations......... On any Distribution Date, Residual
Realizations shall be directed by the
Indenture Trustee to the Residual
Noteholders in accordance with the
Indenture. The Noteholders will not have any
right to any Residual Realization under any
circumstance and neither the Residual Notes
nor the Residual Realizations will provide
credit enhancement for the Class A
Noteholders, the Class B Noteholders, the
Class C Noteholders, the Class D Noteholders
or the Class E Noteholders.
Federal Income Tax
Considerations............ It is intended that the Class A Notes, the
Class B Notes, the Class C Notes and the
Class D Notes will be characterized as
indebtedness of the Issuer for federal
income tax purposes. If characterized as
indebtedness, interest on such Offered Notes
will be taxable as ordinary income when
received by an Offered Noteholder on the
cash method of accounting and when accrued
by Offered Noteholders on the accrual method
of accounting. See "Material Federal Income
Tax Considerations."
ERISA Considerations.......... The Employee Retirement Income Security Act
of 1974, as amended ("ERISA") places certain
restrictions on those pension and other
employee benefits plans to which it applies.
Pursuant to regulations issued by the United
States Department of Labor defining "plan
assets," if the Offered Notes are considered
to be indebtedness without substantial
equity features under local law, the assets
of the Issuer will not be considered assets
of any ERISA plan holding the Notes, thereby
generally avoiding potential application of
ERISA's prohibited transaction rules.
However, in certain circumstances, the
prohibited transaction rules may be
applicable to the purchase of the Offered
Notes even if the Offered Notes are not
deemed to have substantial equity features.
Certain exemptions from the prohibited
transaction rules could be applicable,
however, with respect to the acquisition and
holding of the Offered Notes. Accordingly,
the Offered Notes may be acquired by ERISA
plans, subject to certain restrictions.
Before purchasing any of the Offered Notes,
fiduciaries of such plans should determine
whether an investment in the Offered Notes
is appropriate under ERISA. See "ERISA
Considerations."
16
<PAGE>
Rating........................ It is a condition to the issuance of the
Offered Notes that the Class A-1 Notes be
rated at least "A-1+", "D-1+" and "F1+/AAA",
that the Class A-2, A-3 and A-4 Notes be
rated at least "AAA", "AAA" and "AAA", that
the Class B Notes be rated at least "AA",
"AA+" and "AA", that the Class C Notes be
rated at least "A", "A+" and "A+" and that
the Class D Notes be rated at least "BBB",
"BBB+" and "BBB+" by Standard & Poor's
Ratings Group ("S&P"), Duff & Phelps Credit
Rating Co. ("DCR") and Fitch IBCA, Inc.
("Fitch"), respectively (each a "Rating
Agency"). The ratings assess the likelihood
of timely payment of interest and the
ultimate payment of principal to the Offered
Noteholders by the Stated Maturity date.
There is no assurance that any rating ill
not be lowered or withdrawn if, in the
judgement of any Rating Agency,
circumstances in the future so warrant. See
"Rating of the Notes."
17
<PAGE>
RISK FACTORS
Limited Liquidity. There is currently no public market for the Offered
Notes and there is no assurance that one will develop. The Underwriters expect,
but are not obligated, to make a market in the Offered Notes. There is no
assurance that any such market will be created or, if so created, will continue.
If no public market develops, the Offered Noteholders may not be able to
liquidate their investment in the Offered Notes prior to maturity.
Prepayments and Related Reinvestment Risk. Because the rate of payment
of principal on the Notes will depend, among other things, on the rate of
payment on the Leases, such rate of payments of principal on the Notes cannot be
predicted. Payments on the Leases will include scheduled payments as well as
prepayments permitted by Copelco Capital as the Servicer (to the extent not
replaced with Additional Leases), payments as a result of Non-Performing Leases
(to the extent not replaced by Substitute Leases), Casualty Payments (as defined
herein)(to the extent not replaced by Additional Leases), and payments upon
repurchases by Copelco Capital on account of a breach of certain representations
and warranties in the related Sales and Servicing Agreement (to the extent not
replaced by Substitute Leases)(any such voluntary or involuntary prepayment, a
"Prepayment"). The rate of early terminations of Leases due to Prepayments and
defaults may be influenced by a variety of economic and other factors. For
example, adverse economic conditions and certain natural disasters such as
floods, hurricanes, earthquakes and tornadoes may affect Prepayments. The risk
of reinvesting unscheduled distributions resulting from Prepayments of the Notes
will be borne by the Noteholders. See "Prepayment and Yield Considerations."
Additional Leases and Substitute Leases. As described herein, pursuant
to the Sales and Servicing Agreement, Copelco Capital has the option, but not
the obligation, to designate one or more leases in its portfolio to be an
Additional Lease as a replacement for any partially or fully prepaid lease or
upgraded lease, in which event the scheduled payments from such Additional Lease
will replace (in whole or in part) the remaining scheduled payments on a prepaid
in full Lease. In the event (and only to the extent) that Copelco Capital makes
such a designation, the amount (or portion thereof) received by the Issuer with
respect to a Prepayment will be allocated directly to Copelco Capital and the
payments with respect to the related Notes will be dependent upon the scheduled
payments received on such Additional Leases. In addition, pursuant to the Sales
and Servicing Agreement, Copelco Capital has the option, but not the obligation
to substitute one or more leases as Substitute Leases in exchange for
Non-Performing Leases, Warranty Leases and Adjusted Leases. Accordingly,
payments of principal of and interest on the Notes may be dependent, in part,
upon payments received on such Substitute Leases. In addition, to the extent
that Copelco Capital does not designate one or more leases as Additional Leases
in connection with the full or partial prepayment of a Lease or Substitute
Leases in the case of Non-Performing Leases, Warranty Leases or Adjusted Leases,
the Discounted Present Value of the Performing Leases will be decreased. See
"Prepayment and Yield Considerations."
Copelco Capital is not required to designate one or more leases as an
Additional Lease or to substitute Substitute Leases. Accordingly, Noteholders
should not expect that Additional Leases or Substitute Leases will be available.
Security Interests in the Equipment; Certain Security Interests Not
Perfected. The Leases will consist of either finance Leases (where substantially
all of the value of the Equipment is financed by the lease payments) or
operating leases (where substantially less than all of the value of the
Equipment is recovered through the lease payments). See "The Series Pool--The
Leases." Finance leases include Leases ("Nominal Buy-Out Leases") which contain
a nominal purchase option upon expiration or other terms which may be deemed
effectively to vest equitable ownership of the Equipment in the Lessee. Prior to
the Cut-Off Date, Copelco Capital will have filed Uniform Commercial Code
("UCC") financing statements in its favor against Lessees in respect of
Equipment, including Equipment subject to Nominal-Buy-Out Leases, with an
original Equipment cost in excess of $25,000. Financing statements in favor of
Copelco Capital with respect to approximately 53.6% of the Statistical
Discounted Present Value of the Leases will be filed. No action will be taken to
perfect the interest of Copelco Capital in any Equipment to the extent the
original Equipment cost of the related Equipment is less than $25,000. As a
result, Copelco Capital does not have a perfected security interest in Equipment
with an original Equipment cost of less than or equal to $25,000, which
represents approximately 46.4% of the Statistical Discounted Present Value of
the Leases. In addition, the Indenture and the Sales and Servicing Agreement
will require (a) UCC financing statements for all security interests in the
Equipment owned by the Issuer which are pledged to the Indenture Trustee to be
filed
18
<PAGE>
(to the extent possible by central filing in a state) against the Issuer,
Copelco Capital and the Sponsor (the "Filing Locations"). To the extent UCC
financing statements evidencing Copelco Capital's security interest in the
Equipment have not been filed against the Lessee (i.e., with respect to those
Leases relating to Equipment with an original cost of less than $25,000) and to
the extent the Equipment is located in the states other than the Filing
Locations, any such security interests in the Equipment will not be perfected in
favor of Copelco Capital, the Issuer or the Indenture Trustee and another party
(such as other creditors of Copelco Capital) may acquire rights in Copelco
Capital's interest in the Equipment superior to those of the Issuer or the
Indenture Trustee. See "Certain Legal Matters Affecting a Lessee's Rights and
Obligations." The lack of a perfected security interest in certain Equipment
will result in claims against Lessees being unsecured and may adversely affect
the ability of the Issuer to realize on such Equipment.
Restrictions on Recoveries. State laws impose requirements and
restrictions relating to foreclosure sales and obtaining deficiency judgments
following such sales. In the event that the Issuer must rely on repossession and
disposition of Equipment to cover losses on Non-Performing Leases, the Issuer
may not realize the full amount due because of the application of those
requirements and restrictions. Other factors that may affect the ability of the
Issuer to realize the full amount due on a Lease include the failure to file
financing statements to perfect the Issuer's security interest in the Equipment
against a Lessee, depreciation, obsolescence, damage or loss of any item of
Equipment, and the application of federal and state bankruptcy and insolvency
laws. As a result, the Noteholders may be subject to delays in receiving
payments and losses. See "Certain Legal Matters Affecting a Lessee's Rights and
Obligations."
Insolvency of Copelco Capital. Copelco Capital believes that each
transfer of the Leases should be treated as an absolute and unconditional sale
or assignment. However, in the event of an insolvency of Copelco Capital, a
court could attempt to recharacterize the sale of the related Leases by Copelco
Capital to the Sponsor and the Sponsor to the Issuer as a loan to Copelco
Capital from the Issuer, secured by a pledge of such Leases or could allow the
trustee in bankruptcy to repudiate the Leases that are operating leases and all
obligations thereunder. Moreover, in the event of an insolvency of Copelco
Capital, a court could attempt to consolidate the assets of the Issuer with
those of Copelco Capital since Copelco Capital will indirectly own all of the
beneficial interest in the Issuer. Either attempt, even if unsuccessful, could
result in delays in payments of the related Notes. If such attempts were
successful, such Notes would be accelerated, and the Indenture Trustee's
recovery on behalf of the Noteholders could be limited to the then current value
of the Leases or the underlying Equipment. Thus, the Noteholders could lose the
right to future payments and might incur reinvestment losses on amounts
recovered. Although Copelco Capital believes that the transfers of the Leases
should be treated as an absolute and unconditional sale or assignment, for
accounting and tax purposes the Leases will be treated as assets of Copelco
Capital on its consolidated financial statements and on the tax return for its
consolidated group, which might increase the risk of recharacterization of the
transfer to the Issuer as a financing. See "Certain Legal Matters Affecting a
Lessee's Rights and Obligations."
Credit Enhancement. Credit enhancement with respect to the Offered
Notes will be provided by the subordination as follows: the Class A Notes have
the benefit of the subordination of the Class B Notes, Class C Notes, Class D
Notes, Class E Notes, funds on deposit, if any, in the Reserve Account and any
overcollateralization amounts; the Class B Notes have the benefit of
subordination of the Class C Notes, Class D Notes, Class E Notes, funds on
deposit, if any, in the Reserve Account and any overcollateralization amounts;
the Class C Notes have the benefit of subordination of the Class D Notes, Class
E Notes, funds on deposit, if any, in the Reserve Account and any
overcollateralization amounts; and the Class D Notes have the benefit of
subordination of the Class E Notes, funds on deposit, if any, in the Reserve
Account and any overcollateralization amounts. However, on any Payment Date the
amount available to Noteholders is limited to the extent of funds on deposit in
the Collection Account and the Reserve Account.
Non-Recourse Obligations. The Offered Notes represent debt obligations
of the Issuer secured by the Leases only and do not represent interests in or
recourse obligations of Copelco Capital or any of its affiliates other than the
Issuer. The Issuer is a special purpose trust with limited assets. Consequently,
the Noteholders must rely solely upon the Leases, the Equipment and funds in the
Reserve Account, if any, for payment of principal of and interest on the Offered
Notes. If no funds are on deposit in the Reserve Account and the payments made
on the Leases and the disposition proceeds of the Equipment upon a default are
insufficient to make payments on the Offered Notes, no other assets will be
available for the payment of the deficiency.
19
<PAGE>
Book-Entry Registration. The Offered Notes offered hereby initially
will be represented by one or more notes registered in the name of Cede & Co.
and will not be registered in the names of the beneficial owners or their
nominees. As a result of this, unless and until Definitive Notes are issued,
beneficial owners will not be recognized by the Issuer or the Indenture Trustee
as Offered Noteholders, as that term is used in each Indenture. Hence, until
such time, beneficial owners will only be able to exercise the rights of Offered
Noteholders indirectly, through DTC, Euroclear or CEDEL and their respective
participating organizations, and will receive reports and other information
provided for under the Indenture only if, when and to the extent provided by
DTC, Euroclear or CEDEL, as the case may be, and its participating
organizations. See "Description of the Notes--Book-Entry Registration."
Geographic Concentration of Leases. As of the Cut-Off Date,
approximately 17.7%, 15.9%, 7.8%, 6.0%, and 5.8% of the Leases (based on
statistical Discounted Present Value of the Leases) were located in California,
New York, Texas, New Jersey and Florida, respectively. No other state accounts
for more than 5% of the Leases. See "The Series Pool." Accordingly, adverse
economic conditions or other factors particularly affecting any of these regions
could adversely affect the performance on the Leases.
Commingling of Funds. Under the Indenture, the Servicer is required to
deposit all Lease Payments, Casualty Payments and Termination Payments received
after the Cut-Off Date to the Collection Account within two Business Days of
receipt thereof. If bankruptcy or reorganization proceedings were commenced with
respect to the Servicer, those funds held by the Servicer may be subject to an
automatic stay resulting in a delay in the transfer of such funds to the Trust
Fund.
Insolvency of Lessees; Insolvency of Third Parties. To the extent
Lessees default on the Leases, including through insolvency, Lease Payments
deposited into the Collection Account will decrease and accordingly Available
Funds will be reduced.
Approximately 5% of the Leases were originated by a third party who has
sold the payment stream on the Leases to Copelco Capital but has not sold its
interest in the Equipment. In the event of a bankruptcy of such third party, the
trustee in bankruptcy may seek to repudiate the Leases and, if successful, Lease
Payments on such Leases will cease. Accordingly, Available Funds could be
reduced.
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be distributed to the
owners of the Trust. The Sponsor will use such amounts to purchase the Leases
from Copelco Capital. Copelco Capital will utilize the proceeds from the sale of
the Leases to repay bank debt and for general corporate purposes.
THE SERIES POOL
The Leases. As of the close of business on June 30, 1998 (the "Cut-Off
Date"), the Notes will be secured by the Leases. The Lessees are primarily
hospitals, medical facilities, physicians and business owners throughout the
United States. The Leases were originated or acquired by the Business Technology
Division, the Healthcare Division and the Commercial & Industrial Division of
Copelco Capital (or their predecessors) (the "Origination Divisions"). See "Risk
Factors," "Security for the Notes" and "Certain Legal Matters Affecting a
Lessee's Rights and Obligations." The statistical information included herein
was computed using the Statistical Discounted Present Value of the Leases as of
the Cut-Off Date. The Statistical Discounted Present Value of the Leases will
not vary materially from the Discounted Present Value of the Leases as of the
Cut-Off Date.
Approximately 5% of the Leases were originated by a third party who has
sold the payment stream on the Leases to Copelco Capital but has not sold its
interest in the Equipment. In the event of a bankruptcy of such third party, the
trustee in bankruptcy may seek to repudiate the Leases and, if successful, Lease
Payments on such Leases will cease. Accordingly, Available Funds could be
reduced.
The Leases are triple-net leases which impose no affirmative
obligations on the Lessor, and are non-cancelable by the Lessees. Under certain
conditions, however, Copelco Capital may consent to prepayment of the Leases.
Generally, Copelco Capital will consent to a prepayment of a Lease where the
Lessee is upgrading the
20
<PAGE>
Equipment. All payments under the Leases are absolute, unconditional obligations
of the Lessees without right of offset for any reason. Such payments will be
made by the Lessees to the Servicer for the account of the Issuer.
Each Lessee entered into its Lease for specified Equipment which may be
designated in schedules incorporated into the Lease. To the extent not set forth
in the Lease Contract, the schedules, among other things, establish the periodic
payments and the term of the Lease with respect to such Equipment. The Leases
follow one of several different forms of lease agreement, with occasional
modifications which do not materially affect the basic terms of the Leases. The
weighted average remaining term of the Series Pool is 43.2 months. Copelco
Capital will represent and warrant that, as of Cut-Off Date, all Leases will be
current or less than 63 days delinquent and, as of the initial Determination
Date, all Lessees will have made at least one payment.
Lessees covenant to maintain the Equipment and install it at a place of
business agreed upon with Copelco Capital. Delivery, transportation, repairs and
maintenance are the obligation of the Lessees, and all Lessees are required to
carry, at their respective expense, liability and replacement cost insurance
under terms acceptable to Copelco Capital. Such insurance proceeds will
constitute Casualty Payments (as defined herein). Subject to certain exceptions,
if the Lessee does not provide evidence of insurance coverage within 90 days of
the commencement of the Lease, Copelco Capital obtains such insurance and
invoices the Lessee for the cost thereof. Any defaults under a Lease (as such, a
"Non-Performing Lease," as defined herein) permit a declaration as immediately
due and payable all remaining Lease payments under the Lease and the immediate
return of the Equipment. Generally, any payments received six days after the
scheduled payment date are subject to late charges.
"Non-Performing Leases" are (a) Leases that have become more than 123
days delinquent or (b) Leases that have been accelerated by the Servicer or
Leases that the Servicer has determined to be uncollectible in accordance with
its customary practices.
At the end of the Lease term, the Lessee must return the Equipment with
certification from the manufacturer that the Equipment is in good working order,
normal wear and tear excepted, unless the Lease is renewed or the Equipment is
purchased by the Lessee.
Historically, approximately 90% of the Equipment leased by the
Origination Divisions is purchased or re-leased by the original lessee at the
expiration of the lease term. "Nominal Buy-Out" Leases comprise 28.8% of the
Leases (by Statistical Discounted Present Value). Pursuant to the terms of the
Leases, the Lessee is generally required to advise Copelco Capital 90 to 120
days prior to the Lease termination of its intent to return the Equipment at the
expiration of the Lease. In most cases, the failure by a Lessee to so advise
Copelco Capital results in an automatic renewal of the Lease for a specified
period. For Equipment which is returned to Copelco Capital by the lessees,
Copelco Capital participates in an active secondary market for the sale of used
equipment.
The Equipment. The Equipment subject to the Leases is purchased by
Copelco Capital under direct specifications and instructions from the Lessees.
As of the Cut-Off Date, the Series Pool had approximately 64 equipment
categories.
Certain Information with Respect to the Leases and the Lessees. The
following tables summarize certain information with respect to the Leases and
the Lessees as of the Cut-Off Date.
21
<PAGE>
DISTRIBUTION OF LEASES BY STATE
<TABLE>
<CAPTION>
Percentage
of
Statistical
Statostocal Discounted Percentage
Percentage Discounted Present Aggregate of Original
Number of of Number Present Value Value of Original Equipment
State Leases of Leases of Leases Leases Equipment Cost Cost
- ------- --------- ---------- ---------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Alabama 224 0.46% $ 5,227,597.44 0.77% $ 5,924,478.56 0.77%
Alaska 27 0.06% 268,758.74 0.04% 298,481.14 0.04%
Arizona 400 0.82% 7,243,063.78 1.06% 7,973,366.54 1.04%
Arkansas 59 0.12% 1,192,846.23 0.17% 1,329,653.95 0.17%
California 9,060 18.54% 120,988,494.38 17.73% 133,604,748.84 17.36%
Colorado 1,250 2.56% 12,491,936.28 1.83% 13,730,493.26 1.78%
Connecticut 1,008 2.06% 12,379,929.46 1.81% 13,815,455.23 1.80%
Delaware 96 0.20% 1,011,939.59 0.15% 1,128,470.44 0.15%
District of Columbia 395 0.81% 6,188,959.79 0.91% 7,028,512.60 0.91%
Florida 2,656 5.43% 39,302,559.06 5.76% 44,356,047.57 5.76%
Georgia 1,432 2.93% 20,368,799.18 2.99% 22,605,690.52 2.94%
Guam 3 0.01% 110,015.93 0.02% 116,629.22 0.02%
Hawaii 50 0.10% 843,232.76 0.12% 915,496.70 0.12%
Idaho 96 0.20% 1,259,538.07 0.18% 1,433,453.40 0.19%
Illinois 2,507 5.13% 30,481,612.27 4.47% 34,435,509.33 4.47%
Indiana 621 1.27% 7,637,222.94 1.12% 8,626,917.38 1.12%
Iowa 54 0.11% 2,235,135.18 0.33% 2,421,523.24 0.31%
Kansas 182 0.37% 2,636,334.76 0.39% 2,977,026.66 0.39%
Kentucky 304 0.62% 5,304,756.82 0.78% 6,619,589.45 0.86%
Louisiana 70 0.14% 2,517,103.32 0.37% 2,718,815.35 0.35%
Maine 413 0.85% 4,324,405.21 0.63% 4,742,246.51 0.62%
Maryland 598 1.22% 10,474,415.60 1.54% 11,799,132.66 1.53%
Massachusetts 1,506 3.08% 21,237,034.63 3.11% 23,946,468.80 3.11%
Michigan 420 0.86% 7,411,426.02 1.09% 8,146,207.91 1.06%
Minnesota 191 0.39% 6,225,248.71 0.91% 7,350,112.10 0.95%
Mississippi 225 0.46% 2,602,370.15 0.38% 2,901,088.17 0.38%
Missouri 472 0.97% 5,488,456.62 0.80% 6,197,702.47 0.81%
Montana 61 0.12% 648,873.34 0.10% 716,459.36 0.09%
Nebraska 44 0.09% 1,031,789.94 0.15% 1,124,432.25 0.15%
Nevada 341 0.70% 4,698,148.67 0.69% 5,074,787.47 0.66%
New Hampshire 427 0.87% 4,503,652.64 0.66% 5,144,872.50 0.67%
New Jersey 2,847 5.83% 40,603,043.89 5.95% 46,528,112.59 6.05%
New Mexico 202 0.41% 4,218,922.06 0.62% 4,433,359.81 0.58%
New York 7,875 16.11% 108,552,521.14 15.91% 124,969,885.27 16.24%
North Carolina 836 1.71% 13,985,008.83 2.05% 15,369,768.02 2.00%
North Dakota 5 0.01% 84,851.56 0.01% 94,007.26 0.01%
Ohio 1,494 3.06% 21,289,805.00 3.12% 23,481,206.51 3.05%
Oklahoma 254 0.52% 3,780,653.47 0.55% 4,100,455.32 0.53%
Oregon 458 0.94% 5,498,875.68 0.81% 6,180,874.42 0.80%
Pennsylvania 1,745 3.57% 25,053,412.85 3.67% 28,380,431.52 3.69%
Puerto Rico 1 0.00% 17,480.00 0.00% 24,760.30. 0.00%
Rhode Island 331 0.68% 3,501,220.23 0.51% 3,941,413.97 0.51%
South Carolina 312 0.64% 4,721,626.26 0.69% 5,105,146.31 0.66%
South Dakota 17 0.03% 92,540.56 0.01% 102,195.42 0.01%
Tennessee 332 0.68% 7,183,804.77 1.05% 7,866,126.45 1.02%
Texas 4,245 8.69% 53,444,629.91 7.83% 60,930,490.60 7.92%
Utah 238 0.49% 3,172,250.87 0.46% 3,391,519.73 0.44%
Vermont 36 0.07% 525,600.10 0.08% 604,977.70 0.08%
Virginia 1,072 2.19% 14,334,382.84 2.10% 16,523,057.11 2.15%
Washington 1,072 2.19% 16,274,612.50 2.39% 18,819,471.17 2.45%
West Virginia 111 0.23% 2,370,491.73 0.35% 2,489,301.77 0.32%
Wisconsin 184 0.38% 5,154,277.65 0.76% 7,007,702.84 0.91%
Wyoming 10 0.02% 100,851.37 0.01% 103,220.94 0.01%
======================= =============== ============= ================ ============= ================= =============
Total 48,869 100.00% $682,296,520.78 100.00% $769,651,354.61 100.00%
======================= =============== ============= ================ ============= ================= =============
</TABLE>
22
<PAGE>
DISTRIBUTION OF LEASES BY LEASE BALANCE
<TABLE>
<CAPTION>
Percentage
of
Statistical
Statistical Discounted Percentage
Statistical Discounted Percentage Discounted Present Aggregate of Original
Present Value of the Number of of Number Present Value Value of Original Equipment
Leases Leases of Leases of Leases Leases Equipment Cost Cost
- --------------------------- ------------- ------------- ---------------- ------------- ----------------- -------------
<C> <C> <C> <C> <C> <C> <C>
$0.01 - 5,000.00 18,490 37.84% $ 53,128,126.54 7.79% $ 63,678,841.92 8.27%
5,000.01 - 10,000.00 13,063 26.73% 93,787,477.38 13.75% 107,498,517.44 13.97%
10,000.01 - 15,000.00 6,204 12.70% 76,154,935.43 11.16% 85,627,608.66 11.13%
15,000.01 - 20,000.00 3,686 7.54% 63,616,257.17 9.32% 69,785,761.15 9.07%
20,000.01 - 25,000.00 2,079 4.25% 46,332,871.75 6.79% 50,864,156.91 6.61%
25,000.01 - 30,000.00 1,262 2.58% 34,485,374.14 5.05% 38,271,833.95 4.97%
30,000.01 - 35,000.00 852 1.74% 27,653,282.42 4.05% 30,490,287.50 3.96%
35,000.01 - 40,000.00 554 1.13% 20,730,904.94 3.04% 22,640,692.83 2.94%
40,000.01 - 45,000.00 446 0.91% 18,857,804.43 2.76% 20,957,994.73 2.72%
45,000.01 - 50,000.00 355 0.73% 16,819,398.58 2.47% 18,803,683.76 2.44%
50,000.01 - 60,000.00 457 0.94% 24,892,103.98 3.65% 27,862,535.27 3.62%
60,000.01 - 70,000.00 305 0.62% 19,709,007.49 2.89% 21,914,309.54 2.85%
70,000.01 - 80,000.00 192 0.39% 14,313,802.88 2.10% 16,242,362.57 2.11%
80,000.01 - 90,000.00 146 0.30% 12,377,306.22 1.81% 13,839,295.26 1.80%
90,000.01 - 100,000.00 122 0.25% 11,564,785.30 1.69% 12,993,287.88 1.69%
100,000.01 - 125,000.00 213 0.44% 23,813,673.76 3.49% 26,567,405.49 3.45%
125,000.01 - 150,000.00 117 0.24% 16,034,689.85 2.35% 17,746,025.37 2.31%
150,000.01 - 175,000.00 69 0.14% 11,090,767.47 1.63% 12,292,069.29 1.60%
175,000.01 - 200,000.00 44 0.09% 8,229,186.75 1.21% 9,052,717.28 1.18%
200,000.01 - 300,000.00 105 0.21% 25,116,542.33 3.68% 29,872,118.26 3.88%
300,000.01 - 400,000.00 45 0.09% 15,630,473.45 2.29% 17,639,871.80 2.29%
400,000.01 - 500,000.00 23 0.05% 10,141,164.69 1.49% 11,514,714.17 1.50%
500,000.01 - 600,000.00 12 0.02% 6,601,553.73 0.97% 7,925,979.93 1.03%
600,000.01 - 700,000.00 7 0.01% 4,362,322.45 0.64% 5,262,741.83 0.68%
700,000.01 - 800,000.00 2 0.00% 1,500,059.47 0.22% 1,586,523.08 0.21%
800,000.01 - 900,000.00 6 0.01% 5,195,234.11 0.76% 6,693,275.00 0.87%
900,000.01 - 1,000,000.00 3 0.01% 2,779,805.56 0.41% 3,613,174.00 0.47%
1,000,000.01 - 1,500,000.00 5 0.01% 5,823,401.07 0.85% 6,348,940.18 0.82%
1,500,000.01 - 2,000,000.00 2 0.00% 3,513,293.83 0.51% 3,708,818.00 0.48%
greater than $2,000,000.01 3 0.01% 8,040,913.61 1.18% 8,355,811.56 1.09%
- --------------------------- ------------- ------------- ---------------- ------------- ----------------- -------------
Total................. 48,869 100.00% $682,296,520.78 100.00% $769,651,354.61 100.00%
=========================== ============= ============= ================ ============= ================= =============
</TABLE>
DISTRIBUTION OF LEASES BY REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
Percentage
of
Statistical
Statistical Discounted Percentage
Percentage Discounted Present Aggregate of Original
Number of of Number Present Value of Value of Original Equipment
Remaining Term Leases of Leases Leases Leases Equipment Cost Cost
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 - 12 1,065 2.18% $5,435,324.03 0.80% $9,330,090.01 1.21%
13 - 24 4,861 9.95% 39,567,264.05 5.80% 57,151,704.90 7.43%
25 - 36 21,236 43.45% 195,462,989.46 28.65% 233,184,552.86 30.30%
37 - 48 9,059 18.54% 150,868,117.33 22.11% 169,224,181.20 21.99%
49 - 60 12,443 25.46% 278,201,080.99 40.77% 288,354,271.08 37.47%
61 - 72 174 0.36% 7,412,796.69 1.09% 7,157,236.42 0.93%
73 - 84 31 0.06% 5,348,948.23 0.78% 5,249,318.14 0.68%
- ----------------------------------------------------------------------------------------------------------------------
Total................. 48,869 100.00% $682,296,520.78 100.00% $769,651,354.61 100.00%
======================================================================================================================
</TABLE>
23
<PAGE>
DISTRIBUTION OF LEASES BY ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
Percentage
of
Statistical Percentage
Discounted of
Percentage Statistical Present Aggregate Original
Number of of Number Discounted Present Value of Original Equipment
Original Term Leases of Leases Value of Leases Leases Equipment Cost Cost
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 - 12 200 0.41% $1,225,931.71 0.18% $ 1,568,774.56 0.20%
13 - 24 1,147 2.35% 9,467,584.61 1.39% 13,230,518.22 1.72%
25 - 36 3,895 7.97% 47,781,251.08 7.00% 60,987,361.65 7.92%
37 - 48 21,913 44.84% 195,855,401.06 28.71% 235,325,799.14 30.58%
49 - 60 9,408 19.25% 180,604,994.50 26.47% 198,279,452.07 25.76%
61 - 72 12,234 25.03% 237,644,310.65 34.83% 250,819,300.43 32.59%
73 - 84 57 0.12% 6,757,674.80 0.99% 6,528,694.94 0.85%
85 - 96 15 0.03% 2,959,372.37 0.43% 2,911,453.60 0.38%
- ----------------------------------------------------------------------------------------------------------------------
Total................. 48,869 100.00% $682,296,520.78 100.00% $769,651,354.61 100.00%
======================================================================================================================
</TABLE>
DISTRIBUTION OF LEASES BY CLASSIFICATION TYPE
<TABLE>
<CAPTION>
Percentage
of
Statistical Percentage
Discounted of
Percentage Statistical Present Aggregate Original
Number of of Number Discounted Present Value of Original Equipment
Lease Type Leases of Leases Value of Leases Leases Equipment Cost Cost
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Finance Lease 48,756 99.77% $663,043,502.74 97.18% $740,239,790.25 96.18%
Operating Lease 113 0.23% 19,253,018.04 2.82% 29,411,564.36 3.82%
- ----------------------------------------------------------------------------------------------------------------------
Total................. 48,869 100.00% $682,296,520.78 100.00% $769,651,354.61 100.00%
======================================================================================================================
</TABLE>
DISTRIBUTION OF FINANCE LEASES BY PURCHASE OPTION
<TABLE>
<CAPTION>
Percentage
of
Statistical Percentage
Discounted of
Percentage Statistical Present Aggregate Original
Number of of Number Discounted Present Value of Original Equipment
Purchase Option Leases of Leases Value of Leases Leases Equipment Cost Cost
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nominal Buyout 9,841 20.18% $190,951,145.28 28.80% $205,021,761.85 27.70%
Fair Market Value 30,551 62.66% 320,636,748.94 48.36% 375,137,550.87 50.68%
Fixed Purchase Option 8,364 17.15% 151,455,608.52 22.84% 160,080,477.53 21.63%
- ----------------------------------------------------------------------------------------------------------------------
Total................. 48,756 100.00% $663,043,502.74 100.00% $740,239,790.25 100.00%
======================================================================================================================
</TABLE>
24
<PAGE>
DISTRIBUTION OF LEASES BY EQUIPMENT TYPE
<TABLE>
<CAPTION>
Percentage
of
Statistical Percentage
Discounted of
Percentage Statistical Present Aggregate Original
Number of of Number Discounted Present Value of Original Equipment
Equipment Type Leases of Leases Value of Leases Leases Equipment Cost Cost
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Anesthesia Equipment 21 0.04% 1,237,488.50 0.18% 1,522,497.88 0.20%
Automated Chemistry 234 0.48% 7,816,698.21 1.15% 8,464,872.74 1.10%
Systems
Automated Hematology 402 0.82% 9,139,193.26 1.34% 10,057,767.73 1.31%
Systems
Automated Test Equipment 3 0.01% 83,334.87 0.01% 94,005.81 0.01%
C.T. Systems 3 0.01% 1,232,328.89 0.18% 1,535,516.29 0.20%
C-Arm; IMG Intensifer 5 0.01% 234,387.77 0.03% 263,494.70 0.03%
Systems
Carts, Stretchers, Wheel 29 0.06% 326,369.45 0.05% 339,547.13 0.04%
Chairs
Cash Registers 13 0.03% 259,736.34 0.04% 263,340.23 0.03%
Cobalt and X-Ray Therapy 3 0.01% 307,614.51 0.05% 323,488.66 0.04%
Equipment
Communication Equipment 16 0.03% 654,308.53 0.10% 661,349.23 0.09%
Computer Systems-Doctors 573 1.17% 16,583,512.92 2.43% 17,451,901.19 2.27%
& Hospitals
Computers 1,504 3.08% 24,084,074.37 3.53% 27,087,073.49 3.52%
Construction Equipment 3 0.01% 244,423.79 0.04% 278,106.47 0.04%
Copiers 37,950 77.66% 411,777,725.00 60.35% 464,451,285.92 60.35%
Dental Operatory Equipment 719 1.47% 14,524,891.23 2.13% 14,940,015.35 1.94%
Document Imaging Equipment 139 0.28% 2,090,441.55 0.31% 2,212,978.58 0.29%
ECG (EKG) and 144 0.29% 2,903,789.51 0.43% 3,135,580.14 0.41%
Defibrillators
EEG 7 0.01% 178,494.69 0.03% 190,634.56 0.02%
Electronics Production 299 0.61% 46,957,189.39 6.88% 59,185,161.99 7.69%
Equipment
Facsimiles 2,562 5.24% 9,023,817.34 1.32% 10,543,464.22 1.37%
Furniture and Fixtures 8 0.02% 2,284,411.60 0.33% 2,727,830.43 0.35%
Gamma Cameras 55 0.11% 10,283,494.48 1.51% 11,711,009.18 1.52%
Holter Monitors 61 0.12% 1,027,572.41 0.15% 1,051,731.62 0.14%
Hosp Beds; Elec. Stryker 6 0.01% 116,966.71 0.02% 144,425.75 0.02%
FRMS, Burn Beds
Lasers 43 0.09% 3,729,391.14 0.55% 4,181,078.96 0.54%
Laundry, Kitchen, Food 1 0.00% 1,251,546.23 0.18% 1,083,936.00 0.14%
Srvc Eqp., Central
Supply
Linear Accelerators 1 0.00% 379,276.54 0.06% 432,000.00 0.06%
Lithotripters and 12 0.02% 1,164,680.57 0.17% 1,292,866.57 0.17%
Dialysis Equipment
Mailing Equipment 62 0.13% 477,160.75 0.07% 508,801.03 0.07%
Mammography 23 0.05% 1,704,842.37 0.25% 1,929,270.04 0.25%
Medical Equipment 3 0.01% 26,783.38 0.00% 25,689.66 0.00%
Microfilm Equipment 1 0.00% 3,364.28 0.00% 4,200.00 0.00%
Misc. Comm. & Indus. 49 0.10% 926,703.04 0.14% 1,189,150.42 0.15%
Equip.
Misc X-Ray Eqp(TNKS, 16 0.03% 573,544.20 0.08% 648,798.23 0.08%
Driers, TBLS)
Miscellaneous 226 0.46% 3,137,201.82 0.46% 3,461,697.18 0.45%
Misc Hospital Equipment 233 0.48% 18,339,445.13 2.69% 19,999,987.92 2.60%
Misc Lab Eqp (Pthlgy, 22 0.05% 485,737.12 0.07% 515,655.43 0.07%
Gas, Chrmts, Cntr, Spc)
Misc Vet Eqp; Cages, 4 0.01% 75,738.07 0.01% 70,296.98 0.01%
Scales, Tables
MRI Systems 7 0.01% 3,351,029.78 0.49% 4,472,582.81 0.58%
Office Furniture & 12 0.02% 317,994.72 0.05% 346,915.48 0.05%
Equipment
Operating Microscopes 11 0.02% 260,244.72 0.04% 289,487.27 0.04%
Opthlmc Diag Eqp (Slit 148 0.30% 3,245,907.30 0.48% 3,449,534.13 0.45%
Lamps, Tonometers)
Opt Eqp; Lens Grinding, 485 0.99% 6,753,312.90 0.99% 7,554,027.79 0.98%
Resurfacing
Patient Monitoring Systems 143 0.29% 2,278,515.47 0.33% 2,472,260.29 0.32%
Patient Room Furnishing & 18 0.04% 491,186.04 0.07% 528,787.98 0.07%
Fixtures
Phone, TV, Comm Equipment 65 0.13% 919,520.56 0.13% 974,640.73 0.13%
Photo Equipment 4 0.01% 407,241.12 0.06% 476,954.21 0.06%
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Percentage
of
Statistical Percentage
Discounted of
Percentage Statistical Present Aggregate Original
Number of of Number Discounted Present Value of Original Equipment
Equipment Type Leases of Leases Value of Leases Leases Equipment Cost Cost
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Phys Misc Medical Eqp & 631 1.29% 20,307,269.25 2.98% 21,479,946.22 2.79%
Exam Tables
Physician Office Furn, 16 0.03% 225,185.09 0.03% 228,520.14 0.03%
Fixtures and Phones
Plastic Machinery 1 0.00% 151,606.93 0.02% 195,000.00 0.03%
Podiatry Equipment 1 0.00% 11,390.59 0.00% 12,850.00 0.00%
Printing Equipment 127 0.26% 4,959,484.89 0.73% 5,084,449.61 0.66%
Pulse Oximetry Equipment 1 0.00% 4,304.83 0.00% 6,360.66 0.00%
Radiographic Fluoroscopic 9 0.02% 949,549.52 0.14% 1,083,783.99 0.14%
Systems
Respiratory Therapy 1,488 3.04% 30,315,534.50 4.44% 33,975,589.77 4.41%
Equipment
Scanners 4 0.01% 77,126.46 0.01% 74,883.23 0.01%
Software 9 0.02% 131,598.43 0.02% 128,566.30 0.02%
Standard Printers 19 0.04% 201,001.34 0.03% 191,313.41 0.02%
Standard X-Ray Systems 32 0.07% 1,176,023.81 0.17% 1,304,735.89 0.17%
Surgical Equip. Scopes, 10 0.02% 329,691.33 0.05% 350,524.96 0.05%
Electrosurgical
Typewriters 1 0.00% 3,685.24 0.00% 4,575.50 0.00%
Ultrasound 169 0.35% 9,684,846.20 1.42% 10,889,463.95 1.41%
Wide Format Printers 1 0.00% 2,460.76 0.00% 2,315 0.00%
X-Ray Spec Systems; 2 0.00% 93,129.04 0.01% 92,777.58 0.01%
Angiography
- ----------------------------------------------------------------------------------------------------------------------
Total................. 48,869 100.00% 682,296,520.78 100.00% $769,651,354.61 100.00%
======================================================================================================================
</TABLE>
Historical Delinquency Information. Lease receivables are generally
evaluated by Copelco Capital for write-down when they become over 92 days
delinquent. General delinquency information for equipment leases in the
Origination Divisions that are owned by Copelco Capital is set forth below.
HISTORICAL DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997 December 31, 1996 December 31, 1995 December 31, 1994 December 31, 1993
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
$ % $ % $ % $ % $ $ $ %
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total
Receivables
Balance(1) $1,823,365,530 $1,732,009,721 $1,503,055,810 $1,238,424,241 $1,000,488,313 $736,373,700
- ------------------------------------------------------------------------------------------------------------------------------------
No. of
Delinquent
Days
30-59 Days 29,018,445 1.59% 38,613,963 2.23% 34,481,668 2.29% 26,255,335 2.12% 14,846,559 1.48% 9,184,216 1.25%
60-89 Days 8,811,522 0.48% 11,747,380 0.68% 8,136,578 0.54% 4,976,920 0.40% 3,971,389 0.40% 1,886,765 0.26%
90 Days + 9,931,071 0.54% 16,006,384 0.92% 7,587,972 0.50% 6,703,063 0.54% 6,748,827 0.67% 5,099,200 0.69%
- ------------------------------------------------------------------------------------------------------------------------------------
Total
Delinquency $47,761,038 2.62% $66,367,727 3.83% $50,206,218 3.34% $37,935,318 3.06% $25,566,775 2.56% $16,170,181 2.20%
</TABLE>
- ---------------------------
(1) The Total Receivables Balance is equal to the aggregate future rent
owing on the leases.
26
<PAGE>
Historical Default Experience. All accounts assessed over 92 days past
due automatically become non-accruing accounts. Any subsequent recoveries offset
net losses. General charge-off information for leases in the Origination
Divisions that are owned and serviced by Copelco Capital for the period January
1, 1993 to March 31, 1998 is set forth below.
HISTORICAL CHARGE-OFF EXPERIENCE
<TABLE>
<CAPTION>
Three Months Ended Year Ended December 31
------------------------------------------------------------
March 31, 1998 1997 1996 1995 1994 1993
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Average Receivables $1,777,688 $1,617,532 $1,370,740 $1,119,456 $868,431 $649,278
Outstanding(1)........
Net Losses.............. $6,017 $22,137 $15,713 $11,457 $10,328 $8,842
Net Losses as a Percentage 1.35%(2) 1.37% 1.15% 1.02% 1.19% 1.36%
of Average Receivables
</TABLE>
- ---------------------------
(1) Equals the arithmetic average of the beginning of the period Receivable
Balance and the end of the period Receivable Balance. The Receivables
Balance is equal to the aggregate future rent owing on the leases.
(2) Annualized
There can be no assurance that the levels of delinquency and loss
reflected in the above tables are or will be indicative of the performance of
the Leases in the future.
COPELCO CAPITAL'S UNDERWRITING AND SERVICING PRACTICES
General. Copelco Capital, a Delaware corporation, was incorporated in
October 1986. Copelco Capital is a wholly-owned subsidiary of Copelco Financial
Services Group, Inc. ("Copelco Financial") Copelco Capital's primary business
consists of originating and servicing leases to healthcare providers,
businesses, business owners and individuals in the United States and Canada.
Copelco Capital has multiple locations and is headquartered at 700 East Gate
Drive, Mount Laurel, New Jersey 08054-5400 (as is Copelco Financial) and its
phone number is (609) 231-9600.
In May 1993, Copelco Financial (which was incorporated in July 1982)
reorganized its two primary operating subsidiaries, Copelco Credit Corporation
("Copelco Credit") and Copelco Leasing Corporation ("Copelco Leasing"), into six
strategic business units (each, an "SBU"). Then, effective July 1994, Copelco
Leasing was merged into Copelco Credit with Copelco Credit as the surviving
legal entity; Copelco Credit then changed its name to Copelco Capital, Inc.
merging all of the Copelco Leasing and Copelco Capital leasing operations.
Copelco Capital currently consists of three separate operating
divisions (each, a "Division"): the Business Technology Division, the Healthcare
Division and the Commercial & Industrial Division. The Business Technology
Division, the Healthcare Division and the Commercial & Industrial Division
originated 66.7%, 25.8% and 7.5%, respectively, of the Leases to be included in
the subject transaction (based upon the Statistical Discounted Present Value of
the Leases.)
The Business Technology Division leases small-ticket office equipment,
primarily photocopiers and computers, to businesses and business owners
throughout the United States and Canada through multiple manufacturer, vendor
and dealer programs. The Business Technology Division is the successor division
to Copelco Capital's Document Imaging, Major Accounts, Computer and Canadian
SBUs. Copelco Capital merged these four units in January 1997 in order to
achieve greater operating and marketing efficiencies.
The Healthcare Division provides a diversified range of leasing
services for the financing of healthcare equipment through multiple
manufacturer, vendor and dealer programs, with particular emphasis upon the
acquisition, leasing and remarketing of high-technology medical equipment to
hospitals, other healthcare facilities, healthcare providers and physicians. The
Healthcare Division is the successor of the Hospital and Healthcare SBU and the
Healthcare Vendor SBU which were consolidated in June, 1995 and the Ambulatory
Care SBU which was merged into the Healthcare Division in November, 1996. The
rationale for the consolidation of the
27
<PAGE>
Healthcare Division was to achieve greater operating efficiencies and eliminate
certain operating and marketing redundancies.
The Commercial & Industrial Division is segmented into three distinct
business units: the Electronics Manufacturing Group, the Financial Intermediary
Group and the Material Handling Group. The Electronics Manufacturing Group
provides equipment leasing services through multiple manufacturer, vendor and
dealer programs, primarily to mid-sized companies. The equipment financed
through this group includes high technology equipment for the electronics
manufacturing service industry, such as printed circuit board assembly and test
equipment. The Financial Intermediary Group purchases equipment lease
transactions from third parties involved in the electronics and other industrial
equipment industries. The Material Handling Group, established in 1998, provides
retail equipment leasing and financing specifically for vendors and
manufacturers in the material handling industry.
As of December 31, 1997, Copelco Capital had total assets of
$2,083,256,000 compared with $1,722,212,000 as of December 31, 1996, total
liabilities of $1,927,558,000 compared with $1,588,614,000 as of December 31,
1996, shareholder's equity of $155,698,000 compared with $133,598,000 as of
December 31, 1996 and total revenues and net income of $253,787,000 and
$32,137,000, respectively, for the year ended December 31, 1997, compared with
$210,461,000 and $29,655,000, respectively, for the year ended December 31,
1996.
Since 1986, Copelco Capital and its predecessors have participated in
35 equipment lease securitizations involving the issuance of in excess of $2.7
billion in securities. Copelco Capital and its predecessors performed all
servicing functions in each of these prior transactions, 16 of which remain
outstanding.
Originations. The Business Technology Division leases small-ticket
office equipment, primarily photocopiers and computers, to businesses and
business owners throughout the United States, Canada and western Europe. The
Business Technology Division originates substantially all of its leases through
marketing programs which are directed at major manufacturers and various
distributors of copier equipment (each, a "Vendor") with the balance obtained
through new leases with existing lessees and referrals. The Business Technology
Division establishes both formal and informal relationships with Vendors,
several of which provide Copelco Capital with a right of first refusal on all
equipment leases with the Vendor's customers. This arrangement provides the
division with a steady flow of lease referrals from Vendors which frequently use
lease financing as a marketing tool. In the majority of these vendor programs,
Copelco Capital generally owns the equipment subject to each lease and bills and
collects lease payments in its own name. For some select private label vendor
programs, Copelco Capital will bill and collect in the vendor's name.
The Business Technology Division also offers a cost per copy program
("Cost per Copy"), introduced in late 1990, pursuant to which lessees pay a
fixed monthly payment (the "Fixed Payment") for which they are allowed a certain
minimum monthly copy usage. The monthly Fixed Payment represents equipment
financing (the "Equipment Financing Portion") and a monthly maintenance charge
(the "Maintenance Charge"). Copelco Capital funds the Vendors on the basis of
the Equipment Financing Portion of the Fixed Payment and remits the Maintenance
Charge to the Vendors as it is collected every month. Copelco Capital calculates
usage monthly using automated dialed-in copier meter readings. To the extent
that the usage has exceeded the monthly copy allowance, Copelco Capital bills
the lessee incremental charges for the excess copy usage ("Excess Copy Charge").
This Excess Copy Charge is remitted to the Vendors upon collection by Copelco
Capital. Only the Equipment Financing Portion will be included in the Discounted
Present Value of the Leases.
Vendors may choose to use a Copelco Capital lease form or they may use
their own lease agreement. In either case, the credit approval remains with
Copelco Capital. Lease documents for all leasing programs are either identical
to Copelco Capital's standard lease documents or are reviewed by Copelco Capital
to ensure substantial compliance with its standard terms. Terms of Copelco
Capital's lease documents are standard for virtually all leases, as is
documentation for virtually all private label programs.
The Healthcare Division provides a range of leasing services for the
financing of healthcare equipment with emphasis on the acquisition, leasing and
remarketing of high-technology medical equipment to hospitals, other healthcare
facilities, healthcare providers and physicians. The Healthcare Division
originates leases through five sales groups: National Accounts, Medical
Business, Vendor Services, Home Care, and Ambulatory Care.
28
<PAGE>
The National Accounts sales group solicits contractual
arrangements with major medical equipment manufacturers and distributors
throughout the United States. These contracts usually give Copelco exclusive
rights to handle the financing needs of the manufacturers' customers. Most
manufacturers are publicly-held or subsidiaries of international medical
conglomerates.
The Medical Business sales group provides leasing services
directly to hospitals and to physician group practices rather than through
vendors or manufacturers. The Medical Business marketing unit operates Copelco
Capital's Hospital Instant Lease Line ("HILL") program which grants hospitals a
pre-approved line of credit for the leasing of medium-ticket medical equipment
such as computed tomography scanners, radiographic and other imaging equipment,
laboratory and patient monitoring systems.
The Vendor Services sales group solicits exclusive
contractual arrangements and informal non-exclusive arrangements with local and
regional vendors. Such vendors sell medical equipment to physician group
medical practices and to individual physicians who finance the acquisition of
the equipment by leasing it from Copelco Capital. The Vendor Services marketing
unit operates Copelco Capital's Physician's Instant Lease Line ("PILL")
program, which grants individual physicians and physician group practices a
pre-approved line of credit for use in leasing small- and medium-ticket medical
equipment.
The Home Care Sales group leases durable medical equipment
such as respiratory care equipment, patient monitoring devices and medication
delivery systems for use by people who are being treated on an out-patient or
in-home basis for either temporary or chronic health problems. Lessees are
typically wholesalers, distributors and service providers that rent the
equipment to patients who are reimbursed for the rental payments by their
health care insurers.
The Ambulatory Care sales group provides equipment leasing
to out-patient sites providing healthcare services such as diagnostic imaging,
surgical procedures and radiation therapy. Customers range from start-up
centers (typically managed by established organizations) to publicly-held
companies. Transactions may involve new equipment or refinancing of existing
equipment, often in conjunction with expansion or upgrading.
In addition to making fixed payments with respect to certain
health care equipment leases, lessees may pay incremental monthly charges to
the extent the scan usage exceeds the monthly scan allowance ("Fee Per Scan
Charges"). Fee Per Scan Charges will not be included in the Discounted Present
Value of the Leases. The Fee Per Scan Charges are remitted to the Vendors upon
collection by Copelco Capital.
The Commercial & Industrial Division: The Electronics
Manufacturing Group and the Financial Intermediary Group provide equipment
leasing services primarily to mid-sized companies. Since early 1993, the
division has focused on marketing through manufacturers and distributors in the
electronics manufacturing service industry. Currently, approximately 90% of the
leases originated by this division relate to the electronics manufacturing
service industry and approximately 10% represents machine tools and other
production equipment. The Material Handling Group originates a majority of its
business through its relationship with distributors of material handling
equipment. The Material Handling Group establishes both formal and informal
relationships with vendors, manufacturers, and distributors of material
handling equipment and provides retail leasing and financing for the end-user
customers.
Credit Review. Copelco Capital, in conjunction with the
parent holding company, provides organizational oversight for investment/risk
management policy, compliance, credit underwriting and due diligence standards,
and coordinates portfolio concentration guidelines and credit personnel
training for each of its Divisions. Within the parameters established by
Copelco Capital, each Division tailors its underwriting policies to reflect
their unique customers and markets.
Certain credit requests are evaluated under credit scoring
models utilized by Copelco Capital. All credit requests not subject to
automated credit scoring must be underwritten by a credit officer. Applicants
declined by credit scoring may be reviewed by a credit officer. Each credit
officer has a specific assigned lending limit based upon experience and
seniority. Credit approval limits, applicable to single transaction size and
individual lessee exposure, are also assigned to assistant credit managers,
group credit officers, the president of Copelco Capital, and the chief credit
officer of Copelco Capital. In general, transactions in excess of $3,000,000
must be approved by the senior management of Copelco Financial.
29
<PAGE>
Business Technology Division: Prior to a lease being
approved by the Business Technology Division, the vendor's sales personnel are
required to obtain from the prospective lessee historical financial data and/or
bank and trade references. New and repeat applicants must either complete a
comprehensive credit application or provide bank and trade references.
Credit data are submitted for credit review in Mahwah, New
Jersey and Moberley, Missouri for copiers and Mahwah, New Jersey for computers.
Credit review is performed and lease approvals are given at these locations,
utilizing a computer system designed to handle applications which are
telephoned or telecopied from vendors. Using the computer system, the
applicant's credit is investigated and a credit decision is made.
Lessee evaluation includes an analysis of credit payment
history, business structure, banking history and relationships, and economic
conditions as they relate to the prospective lessee. In the case of a credit
request for equipment having a cost greater than approximately $50,000, the
information collected includes the prospect's most recent financial statements.
If individual guarantors are involved, a consumer credit bureau report is
generally obtained for the guarantors. Potential lessees should generally have
been in business for at least two years and a minimum of two trade references
are required.
The Business Technology Division has also implemented an
automated credit scoring system. The system, designed by Dun & Bradstreet
specifically for the Business Technology Division, was in development over a
two-year period and was formally implemented on January 4, 1994. The system
utilizes various filters for adapting "approve" and "decline" threshold scores
based upon criteria such as credit exposure, payment history (by SIC code),
Vendor and state. The model is consistent with the Business Technology
Division's traditional credit decision-making criteria (i.e., Dun & Bradstreet
data, consumer credit bureau information, and bank and trade references).
Healthcare Division: For leases originated by the Medical
Business sales group, full financial statements are required for credit review,
and a thorough history of past payment patterns is examined. Other items such
as a hospital's location, utility to its community and ownership (public or
private) are also considered. Certain of these transactions are credit scored
under HILL credit scoring parameters. The HILL credit scoring parameters
include, without limitation, the number of beds of the potential lessee, its
occupancy rate and Dun & Bradstreet Information Services ("Dun & Bradstreet")
financial highlight information.
Certain of the leases originated by the Vendor Services
group are credit scored under PILL credit scoring parameters. The PILL credit
scoring parameters include, without limitation, the length of time in practice
of the potential lessee, the potential lessee's medical specialty and a
consumer bankruptcy predictor model acquired by Copelco Capital. The credit
review process for physicians is similar to that of personal lending because
the lessees are predominantly individual physicians (or groups of physicians).
Many of the leases to physicians have personal guarantees associated with them
and spousal guarantees as well. Lessees are not required, however, to give
Copelco Capital liens on property. The predominant reason for delinquencies in
such leases is cash flow deficiencies and, to a lesser extent, death of the
lessee, in which case settlement with the lessee's estate can take several
months. Such leases are typically processed under the PILL program. For
inexpensive equipment, credit review of physician lessees involves analysis of
credit bureau reports, bank references, duration of practice and medical
specialty. For more expensive equipment, the credit review involves analysis of
personal income tax returns and financial statements of the practice in
addition to credit bureau reports and bank references. There is also a focus on
the length of time that the physician has maintained his or her private
practice.
The PILL and the HILL programs afford Copelco Capital the
ability to analyze physician, physician group practice and hospital credit
quality in advance of the lease decision, thus providing a means by which
physicians in certain medical specialties and certain hospitals may be
pre-approved for a leasing line of credit. They also provide rapid turnaround
of a specific application when it is submitted
National Accounts, Home Health and Ambulatory Care generally
utilize a combination of transactional credit analysis and credit scoring.
Transactions not eligible for credit scoring are reviewed by the Healthcare
Division's credit staff under the supervision of a senior credit officer.
Commercial & Industrial Division: In the Electronic
Manufacturing Group and Financial Intermediary Group, all credit decisions are
made by credit analysts. Credit scoring is not used. In general,
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transactions in excess of $50,000 require financial statement disclosure
consisting of at least the three most recent fiscal year-end financial
statements and interim financial statements. Additionally, Dun & Bradstreet
reports, bank and other credit references, trade references, and other
information may be evaluated. Transactions involving small, privately held
companies exhibiting limited financial resources require the financial
disclosure and personal guaranty of the principals. Consideration will also be
given to the value of the equipment securing the transaction, based upon a
review by the Group's Asset Management department. An approval might contain
restrictive conditions, including, but not limited to, a reduced term,
guaranties, security deposits, down payments, or a letter of credit.
The Material Handling Group utilizes a credit review system
similar to and based upon that of the Business Technology Division. The
majority of business originates through dealer/vendor networks, with retail and
wholesale credit applications submitted via fax. The assessment of
creditworthiness is determined through both automated systems and credit
officer analysis with emphasis on the following factors: time in business,
financial strength, payment/credit history, transaction structure, collateral
and industry outlook.
The evaluation of creditworthiness for retail end-user
customers will be accomplished through a modified version of the Business
Technology Division's credit scoring model, in which the filters and scoring
thresholds are adapted to the needs of the Material Handling Group. Retail
lease applicants will generally have been in business for at least two years
with evidence of satisfactory bank and/or comparable secured lender references.
Consumer credit bureau reports will be obtained if individual guarantors or
sole proprietors are considered in the transaction.
The terms of the Leases originated by each of the Divisions
require the lessees to maintain the equipment and install it at a place of
business approved by Copelco Capital. Delivery, transportation, repairs and
maintenance are obligations of lessees, and lessees are required to carry, at
their own expense, liability and replacement cost insurance under terms
acceptable to Copelco Capital. Any lease payment defaults permit Copelco
Capital to declare immediately due and payable all remaining lease payments. At
the end of a lease term, lessees must return the leased equipment to Copelco
Capital in good working order unless the lease is renewed or the leased
equipment is purchased by the lessee.
Collections. Collection procedures have been instituted by
Copelco Capital and are uniformally utilized throughout Copelco Capital's
Divisions. A late charge is generally assessed to lessees 6 days after the
payment due date. Telephone contact is normally initiated when an account is 15
days past due, but may be initiated more quickly. All collection activity is
entered into the computerized collection system. Activity notes are input
directly into the collection system in order to facilitate routine collection
activity. Collectors have available at their computer terminals the latest
status and collection history on each account.
Generally, on the day on which a Lease becomes 10 days
delinquent, Copelco Capital's credit and collection review system automatically
generates a computerized late notice which is sent directly to the lessee. When
an account becomes 30 days past due, a default letter is generally sent out to
the lessee and to anyone providing personal guarantees on the Leases. An
acceleration letter is sent to all lessees and guarantors when a Lease becomes
45 days past due, as circumstances warrant. Telephone contact will be continued
throughout the delinquency period. Accounts which become over 90 days past due
are subject to repossession of Equipment and action by collection agencies and
attorneys. Prior to being written down (which is generally prior to the lease
being 123 days delinquent), each lease is evaluated on the merits of the
individual situation, with equipment value being considered as well as the
current financial strength of the lessee.
Sales and Servicing Agreement. Copelco Capital will enter into
an agreement (the "Sales and Servicing Agreement") with the Issuer and the
Sponsor, pursuant to which Copelco Capital will, among other things, service the
Leases, make Servicer Advances and forward Excess Copy Charges, Maintenance
Charges and Fee Per Scan Charges to Vendors. In the Sales and Servicing
Agreement, Copelco Capital will make certain representations and warranties
regarding the Leases and the Equipment. In the event that (a) any of such
representations and warranties made by Copelco Capital proves at any time to
have been inaccurate in any material respect as of the Issuance Date or (b) any
Lease shall be terminated in whole or in part by a Lessee, or any amounts due
with respect to any Lease shall be reduced or impaired, as a result of any
action or inaction by Copelco Capital (other than any such action or inaction of
Copelco Capital, when acting as Servicer, in connection with the enforcement of
any Lease (other than an Early Lease Termination) in a manner consistent with
the provisions of the Sales and Servicing
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Agreement) or any claim by any Lessee against Copelco Capital and, in any such
case, the event or condition causing such inaccuracy, termination, reduction,
impairment or claim shall not have been cured or corrected within 30 days after
the earlier of the date on which Copelco Capital is given notice thereof by the
Issuer or the Indenture Trustee or the date on which Copelco Capital otherwise
first has notice thereof, Copelco Capital will repurchase such Lease (a
"Warranty Lease") and the Equipment subject thereto by paying to the Indenture
Trustee for deposit into the Collection Account, not later than the
Determination Date next following the expiration of such 30-day period, an
amount at least equal to the Discounted Present Value of such Lease plus any
amounts previously due and unpaid thereon. In the alternative, subject to the
satisfaction of certain requirements set forth in the Sales and Servicing
Agreement, Copelco Capital will have the option to substitute one or more
Substitute Leases for such Warranty Lease. Any inaccuracy in any representation
or warranty with respect to (i) the priority of the lien of the Indenture with
respect to any Lease or (ii) the amount (if less than represented) of the Lease
Payments, Casualty Payments, Termination Payments or Booked Residual Value
under any Lease shall be deemed to be material. "Booked Residual Value" means
the amount booked by Copelco Capital as expected to be realized upon scheduled
termination of a Lease through sale or other disposition of the related
Equipment.
Servicing Fee. The Servicing Fee with respect to the Notes
will be paid monthly on the Payment Date from amounts in the Collection Account
and will be calculated by multiplying one-twelfth of 0.75% times the Discounted
Present Value of the Performing Leases, as of the prior Payment Date.
The Servicing Fee will be paid to the Servicer for servicing
the Series Pool and for certain administrative expenses in connection with the
Notes, including Indenture Trustee Fees and Owner Trustee fees.
FORMATION OF THE ISSUER
General
The Issuer, Copelco Capital Funding Trust 1998-A, is a
business trust formed in accordance with the laws of the State of Delaware,
pursuant to the Trust Agreement, solely for the purpose of effectuating the
transactions described herein. Prior to formation, the Issuer will have had no
assets or obligations and no operating history. Upon formation, the Issuer will
not engage in any business activity other than (i) acquiring, holding and
pledging the Leases and related interests and property related thereto, (ii)
issuing the Securities and (iii) distributing payments thereon.
The Owner Trustee
Wilmington Trust Company, which will serve as the Owner
Trustee under the Trust Agreement, is a Delaware banking corporation and its
principal offices are located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001. The Owner Trustee will perform limited
administrative functions under the Trust Agreement. The Owner Trustee's duties
in connection with the issuance and sale of the Securities is limited solely to
the express obligations of the Owner Trustee as set forth in the Trust
Agreement.
Indenture Trustee
Manufacturers and Traders Trust Company, the Indenture
Trustee under the Indenture, is a New York banking corporation and its
principal offices are located at One M&T Plaza, Buffalo, New York 14203.
Trust Funds
The Trust Funds will consist of a pool (the "Series Pool") of
healthcare, manufacturing and business equipment lease contracts (the "Lease
Contracts"), including payments due thereunder (the "Lease Receivables",
together with the Lease Contracts, the "Leases") and certain interest in the
related leased equipment (the "Equipment") acquired or originated by Copelco
Capital and transferred to the Sponsor, then in turn to the Issuer. The Trust
Funds will, in addition, include the funds on deposit in Collection Account and
the Reserve Account.
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DESCRIPTION OF THE NOTES
The Notes will be issued pursuant to the Indenture (the
"Indenture") between the Issuer and Manufacturers and Traders Trust Company, as
indenture trustee (the "Indenture Trustee"). The following statements with
respect to the Notes are subject to the detailed provisions of the Indenture,
the form of which is filed as an exhibit to the registration statement of which
this Prospectus forms a part. Whenever any particular section of the Indenture
or any term used therein is referred to, the statement in connection with which
such reference is made is qualified in its entirety by such reference.
General. The Offered Notes represent secured debt obligations
of the Issuer secured by the Trust Fund, and the privately placed Class E Notes
represent subordinated debt obligations of the Issuer only secured by the Trust
Fund as provided in the related Indenture. Neither represents an interest in or
recourse obligation of Copelco Capital or any of its other affiliates other
than the Issuer. The Issuer is a Delaware business trust with limited assets.
Consequently, Noteholders must rely solely upon the Leases, the interests in
the Equipment, funds on deposit in the Collection Account and the Reserve
Account, for payment of principal of and interest on the Offered Notes.
The Initial Principal Amount of the Notes shall be equal to
the Discounted Present Value of the Leases as of the Cut-Off Date. Such
Discounted Present Value of the Leases, at any given time, shall equal the
future remaining scheduled payments from the related Leases (including
Non-Performing Leases), discounted at the Discount Rate, as set forth in the
Indenture.
Each Note will bear interest from the Issuance Date at the
applicable Interest Rate, calculated on the basis of a year of 360 days
comprised of twelve 30-day months, except in the case of the Class A-1 Notes,
which interest will be calculated on the basis of a year of 360 days and the
actual number of days in such Interest Accrual Period, payable on the fifteenth
day of each month (or if such day is not a business day the next succeeding
business day), to the person in whose name the Note was registered at the close
of business on the preceding Record Date. Principal will be payable as set
forth under "Distributions on Notes." Notes may be presented to the corporate
trust office of the Indenture Trustee for registration of transfer or exchange
(Section 2.03). Notes may be exchanged without a service charge, but the Issuer
may require payment to cover taxes or other governmental charges (Section
2.03).
Book-Entry Registration. Class A Noteholders, Class B
Noteholders, Class C Noteholders and Class D Noteholders may hold their notes
through DTC (in the United States) or Cedel or Euroclear (in Europe) if they
are participants of such systems, or indirectly through organizations which are
participants in such systems.
Cede, as nominee for DTC, will hold the global Class A Note
or Notes, global Class B Note or Notes, global Class C Note or Notes and the
global Class D Note or Notes. Cedel and Euroclear will hold omnibus positions
on behalf of their participants through customers' securities accounts in
Cedel's and Euroclear's names on the books of their respective Depositaries (as
defined herein) which in turn will hold such positions in customers' securities
accounts in the Depositaries' names on the books of DTC. Citibank will act as
depositary for Cedel, and Morgan Guaranty Trust will act as depositary for
Euroclear (in such capacities, the "Depositaries").
DTC is a limited-purpose trust company organized under the
laws of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the UCC and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participating organizations
("Participants") and facilitate the settlement of securities transactions
between Participants through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of notes.
Participants include the Underwriters, securities brokers and dealers, banks,
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Transfers between Participants will occur in accordance with
DTC rules. Transfers between Cedel Participants (as defined herein) and
Euroclear Participants (as defined herein) will occur in accordance with their
respective rules and operating procedures.
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Cross-market transfers between persons holding directly or
indirectly through DTC, on the one hand, and directly or indirectly through
Cedel Participants or Euroclear Participants, on the other, will be effected
through DTC in accordance with DTC rules on behalf of the relevant European
international clearing systems by its Depositary. Cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its rules
and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Cedel Participants
and Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities
received in Cedel or Euroclear as a result of a transaction with a Participant
will be made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. Such credits or any
transactions in such securities settled during such processing will be reported
to the relevant Euroclear or Cedel Participants on such business day. Cash
received in Cedel or Euroclear as a result of sales of securities by or through
a Cedel Participant or a Euroclear Participant to a Participant will be
received with value on the DTC settlement date but will be available in the
relevant Cedel or Euroclear cash account only as of the business day following
settlement in DTC. For information with respect to tax documentation procedures
relating to the Offered Notes, see "Material Federal Income Tax
Considerations."
Offered Noteholders that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of,
or other interests in, Offered Notes may do so only through Participants and
Indirect Participants. In addition, Offered Noteholders will receive all
distributions of principal and interest on the Offered Notes from the Indenture
Trustee through DTC and its Participants. Under a book-entry format, Offered
Noteholders will receive payments after the related Distribution Date, as the
case may be, because, while payments are required to be forwarded to Cede, as
nominee for DTC, on each such date, DTC will forward such payments to its
Participants which thereafter will be required to forward them to Indirect
Participants or holders of beneficial interests in the Offered Notes. It is
anticipated that the only Noteholder of the Offered Notes will be Cede, as
nominee of DTC, and that holders of beneficial interests in the Offered Notes,
under the Indenture will only be permitted to exercise rights under the
Indenture indirectly through DTC and its Participants who in turn will exercise
their rights through DTC.
Under the rules, regulations and procedures creating and
affecting DTC and its operations, DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Offered Notes
and is required to receive and transmit distributions of principal of and
interest on the Offered Notes. Participants and Indirect Participants with
which holders of beneficial interests in the Offered Notes have accounts
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of these respective holders.
Because DTC can only act on behalf of Participants, who in
turn act on behalf of Indirect Participants and certain banks, the ability of
holders of beneficial interests in the Offered Notes to pledge Offered Notes to
persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such Offered Notes, may be limited due to the lack
of a Definitive Note for such Offered Notes.
DTC has advised the Issuer that it will take any action
permitted to be taken by a Class A Noteholder, Class B Noteholder, Class C
Noteholder or Class D Noteholder under the Indenture only at the direction of
one or more Participants to whose account with DTC the Class A Notes, Class B
Notes, Class C Notes or Class D Notes are credited. Additionally, DTC has
advised the Issuer that it may take actions with respect to the applicable
Offered Notes that conflict with other of its actions with respect thereto.
Cedel is incorporated under the laws of Luxembourg as a
professional depository. Cedel holds securities for its participating
organizations ("Cedel Participants") and facilitates the clearance and
settlement of securities transactions between Cedel Participants through
electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in Cedel in any of 28 currencies, including United States dollars.
Cedel provides to Cedel Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedel interfaces with domestic
markets in several countries. As a professional depository, Cedel is subject to
regulation by the Luxembourg Monetary Institute. Cedel Participants are
recognized
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financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include the Underwriters. Indirect access to Cedel
is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for
participants of Euroclear ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 29 currencies,
including United States dollars. Euroclear includes various other services,
including securities lending and borrowing and interfaces with domestic markets
in several countries generally similar to the arrangements for cross-market
transfers with DTC described above. Euroclear is operated by the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York (the "Euroclear
Operator"), under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by
the Euroclear Operator and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for Euroclear on behalf of
Euroclear Participants. Euroclear Participants include banks (including central
banks), securities brokers and dealers and other professional financial
intermediaries and may include the Underwriters. Indirect access to Euroclear
is also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York
banking corporation which is a member bank of the Federal Reserve System. As
such, it is regulated and examined by the Board of Governors of the Federal
Reserve System and the New York Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the
Euroclear Operator are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear System and
applicable Belgian law (collectively, the "Terms and Conditions"). The Terms
and Conditions govern transfers of securities and cash within Euroclear,
withdrawals of securities and cash from Euroclear, and receipts of payments
with respect to securities in Euroclear. All securities in Euroclear are held
on a fungible basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear Participants, and has no record of or
relationship with persons holding through Euroclear Participants.
Distributions with respect to Offered Notes held through
Cedel or Euroclear will be credited to the cash accounts of Cedel Participants
or Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will
be subject to tax reporting in accordance with relevant United States tax laws
and regulations. See "Material Federal Income Tax Considerations." Cedel or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by an Offered Noteholder under the Indenture on behalf of a Cedel
Participant or Euroclear Participant only in accordance with its relevant rules
and procedures and subject to its Depositary's ability to effect such actions
on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of Offered Notes among
participants of DTC, Cedel and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
Definitive Notes. The Offered Notes will be issued in fully
registered, authenticated form to Beneficial Owners or their nominees (the
"Definitive Notes"), rather than to DTC or its nominee, only if (a) the Issuer
advises the Indenture Trustee in writing that DTC is no longer willing or able
to discharge properly its responsibilities as Depository with respect to such
Notes, and the Indenture Trustee or the Issuer is unable to locate a qualified
successor or (b) the Issuer at its option elects to terminate the book-entry
system through DTC (Section 2.06).
Upon the occurrence of any of the events described in the
immediately preceding paragraph, the Indenture Trustee is required to notify
all Beneficial Owners through DTC of the availability of Definitive Notes for
such Class. Upon surrender by DTC of the Definitive Note representing the Notes
and instructions for
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reregistration, the Indenture Trustee will issue such Definitive Notes, and
thereafter the Indenture Trustee will recognize the holders of such Definitive
Notes as Offered Noteholders under the related Indenture (the "Holders")
(Section 2.07). The Indenture Trustee will also notify the Holders of any
adjustment to the Record Date with respect to the Notes necessary to enable the
Indenture Trustee to make distributions to Holders of the Definitive Notes for
such Class of record as of each Payment Date.
Additionally, upon the occurrence of any such event described
above, distribution of principal of and interest on the Offered Notes will be
made by the Indenture Trustee directly to Holders in accordance with the
procedures set forth herein and in the Indenture. Distributions will be made by
check, mailed to the address of such Holder as it appears on the Note register
Upon at least 10 days' notice to Noteholders for such Class; however, the final
payment on any Note (whether the Definitive Notes or the Note for such Class
registered in the name of Cede representing the Notes of such Class) will be
made only upon presentation and surrender of such Note at the office or agency
specified in the notice of final distribution to Noteholders.
Definitive Notes of each Class will be transferable and
exchangeable at the offices of the Indenture Trustee or its agent in New York,
New York, which the Indenture Trustee shall designate on or prior to the
issuance of any Definitive Notes with respect to such Class. No service charge
will be imposed for any registration of transfer or exchange, but the Indenture
Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith (Section 2.03(e)).
Collection Account. The Indenture Trustee will establish and
maintain an Eligible Account (the "Collection Account") into which the Servicer
will deposit all Lease Payments, Casualty Payments, Termination Payments and
recoveries from Non-Performing Leases to the extent Copelco Capital has not
substituted a Substitute Lease for such Non-Performing Lease (except to the
extent required to reimburse unreimbursed Servicer Advances) (each as defined
herein) on or in respect of each Lease included in the Series Pool within two
Business Days of receipt thereof; provided that Residual Realizations will not
be deposited in the Collection Account. All Lease Payments, Casualty Payments,
Termination Payments and other payments relating to a Lease received and so
deposited in the Collection Account shall constitute property of the Issuer,
securing payments on the related Notes (Section 3.02(a)).
An "Eligible Account" means either (a) an account maintained
with a depository institution or trust company acceptable to the Rating Agency,
or (b) a trust account or similar account maintained with a federal or state
chartered depository institution, which may be an account maintained with the
Indenture Trustee.
A "Casualty Payment" is any payment pursuant to a Lease on
account of the loss, theft, condemnation, governmental taking, destruction, or
damage beyond repair (each, a "Casualty") of any item of Equipment subject
thereto which results, in accordance with the terms of the Lease, in a
reduction in the number or amount of any future Lease Payments due thereunder
or in the termination of the Lessee's obligation to make future Lease Payments
thereunder.
A "Lease Payment" is each periodic installment of rent
payable by a Lessee under a Lease. Casualty Payments, Termination Payments,
prepayments of rent required pursuant to the terms of a Lease at or before the
commencement of the Lease, payments becoming due before the applicable Cut-Off
Date and supplemental or additional payments required by the terms of a Lease
with respect to taxes, insurance, maintenance (including, without limitation
any Maintenance Charges), or other specific charges, (including, without
limitation, any Excess Copy Charges and Fee Per Scan Charges), shall not be
Lease Payments hereunder.
A "Termination Payment" is a payment payable by a Lessee
under a Lease upon the early termination of such lease (but not on account of a
casualty or a Lease default) which may be agreed upon by the Servicer, acting
in the name of the Issuer, and the Lessee.
The Indenture Trustee shall deposit the following funds into
the Collection Account (Section 3.03(a)), which funds received on or prior to
the related Determination Date with respect to the related Due Period,
including any funds deposited into the Collection Account from the Reserve
Account, shall be available for distribution ("Available Funds"), pursuant to
the Indenture, on the next succeeding Payment Date:
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a) Lease Payments due during the prior Due Period (net
of any Excess Copy Charges, Maintenance Charges and
Fee Per Scan Charges);
b) recoveries from Non-Performing Leases to the extent
Copelco Capital has not substituted Substitute Leases
for such Non-Performing Leases (except to the extent
required to reimburse unreimbursed Servicer
Advances);
c) late charges received on delinquent Lease payments
not advanced by the Servicer;
d) proceeds from repurchases by Copelco Capital of
Leases as a result of breaches of representations and
warranties to the extent Copelco Capital has not
substituted Substitute Leases for such Leases other
than Residual Warranty Payments;
e) proceeds from investment of funds in the Collection
Account and the Reserve Account, if any;
f) Casualty Payments other than Residual Casualty
Payments;
g) Servicer Advances;
h) Termination Payments to the extent the Issuer does
not reinvest such Termination Payments in Additional
Leases other than Residual Prepayments; and
i) to the extent there occurs an Available Funds
Shortfall, funds, if any, on deposit in the Reserve
Account.
Available Funds will not include Residual Realizations.
Reserve Account. The Indenture Trustee will establish and
maintain an Eligible Account (the "Reserve Account"). On the Closing Date, the
Issuer will make an initial deposit in an amount equal to 1% of the Discounted
Present Value of the Leases as of the Cut-Off Date into the Reserve Account. In
the event that Available Funds (exclusive of amounts on deposit in the Reserve
Account) are insufficient to pay the amounts owing the Servicer, Interest
Payments on the Notes and the Class A Principal Payment, the Class B Principal
Payment, the Class C Principal Payment, the Class D Principal Payments and the
Class E Principal Payments (such payments, the "Required Payments" and such
shortfall, an "Available Funds Shortfall"), the Indenture Trustee will withdraw
from the Reserve Account an amount equal to the lesser of the funds on deposit
in the Reserve Account (the "Available Reserve Amount") and such deficiency. In
addition, on each Payment Date, Available Funds remaining after the payment of
the Required Payments will be deposited into the Reserve Account to the extent
that the Required Reserve Amount exceeds the Available Reserve Amount. The
"Required Reserve Amount" equals the lesser of (a) 1.00% of the Discounted
Present Value of the Leases as of the Cut-Off Date and (b) the Outstanding
Principal Amount of the Notes. Any amounts on deposit in the Reserve Account in
excess of the Required Reserve Amount will be released to the Issuer (Section
3.05(c)).
Distributions on Notes. Payments on the Notes will commence
on August 17, 1998. On or before the fifth day prior to each Payment Date (or
the preceding business day, if such day is not a business day) (each, a
"Determination Date"), the Servicer will determine the Available Funds and the
Required Payments.
For each Payment Date, the interest due with respect to the
Notes will be the interest that has accrued on such Notes since the last
Payment Date (or, in the case of the first Payment Date, with respect to the
Class A-1 Notes, since the Issuance Date, and with respect to all other Notes,
since July 15, 1998) at the applicable Interest Rates applied to the
Outstanding Principal Amount of each Class, after giving effect to payments of
principal to Noteholders on the preceding Payment Date, plus all previously
accrued and unpaid interest on the Notes (the "Interest Payments") (Section
2.01(c)). Funds in the Collection Account, together with reinvestment earnings
thereon, will be used by the Indenture Trustee to make required payments of
principal and interest on the related Notes (Section 3.03(b)).
37
<PAGE>
For each Payment Date, Principal Payments due with respect to
the Class A Notes, the Class B Notes, Class C Notes, Class D Notes and the
Class E Notes will be the Class A Principal Payment, the Class B Principal
Payment, the Class C Principal Payment, the Class D Principal Payment and the
Class E Principal Payment, respectively. In addition, to the extent that the
Class B Floor exceeds the Class B Target Investor Principal Amount, the Class C
Floor exceeds the Class C Target Investor Principal Amount, the Class D Floor
exceeds the Class D Target Investor Principal Amount and/or the Class E Floor
exceeds the Class E Target Investor Principal Amount, Additional Principal
shall be distributed, sequentially, as an additional principal payment on the
Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, the Class B
Notes, the Class C Notes, the Class D Notes and the Class E Notes until the
Outstanding Principal Amount of each Class has been reduced to zero (Section
3.03(b)).
Unless an Event of Default and acceleration of the Notes has
occurred, on or before each Payment Date, the Servicer will instruct the
Indenture Trustee to apply or cause to be applied the Available Funds to make
the following payments in the following priority (Section 3.03(b)):
(a) to pay the Servicing Fee;
(b) to reimburse unreimbursed Servicer Advances in
respect of a prior Payment Date;
(c) to make Interest Payments, owing on the Class A
Notes concurrently to the Class A-1 Noteholders,
Class A-2 Noteholders, Class A-3 Noteholders and
Class A-4 Noteholders;
(d) to make Interest Payments on the Class B Notes;
(e) to make Interest Payments on the Class C Notes;
(f) to make Interest Payments on the Class D Notes;
(g) to make Interest Payments on the Class E Notes;
(h) to make the Class A Principal Payment to (i) the
Class A-1 Noteholders only, until the Outstanding
Principal Amount on the Class A-1 Notes is reduced
to zero, then (ii) to the Class A-2 Noteholders
only, until the Outstanding Principal Amount on the
Class A-2 Notes is reduced to zero, then (iii) to
the Class A-3 Noteholders only, until the
Outstanding Principal Amount on the Class A-3 Notes
is reduced to zero, and finally (iv) to the Class
A-4 Noteholders, until the Outstanding Principal
Amount on the Class A-4 Notes is reduced to zero;
(i) to make the Class B Principal Payment to the
Class B Noteholders;
(j) to make the Class C Principal Payment to the Class C
Noteholders;
(k) to make the Class D Principal Payment to the Class D
Principal Noteholders;
(l) to make the Class E Principal Payment to the Class
E Principal Noteholders;
(m) to pay the Additional Principal, if any, as an
additional reduction of principal, to the Class A
Noteholders then receiving the Class A Principal
Payment, until the Outstanding Principal Amount as
provided in Clause (h) above on all of the Class A
Notes has been reduced to zero, then to Class B
Noteholders until the Outstanding Principal Amount
on the Class B Notes has been reduced to zero, then
to the Class C Noteholders until the Outstanding
Principal Amount on the Class C Notes has been
reduced to zero, then to the Class D Noteholders
until the Outstanding Principal Amount on the Class
D Notes has been reduced to zero, and finally to the
Class E Noteholders, until the Outstanding Principal
Amounts on the Class E Notes has been reduced to
zero;
38
<PAGE>
(n) to make a deposit to the Reserve Account in an
amount equal to the excess of the Required Reserve
Amount over the Available Reserve Amount; and
(o) to the Issuer, the balance, if any.
Advances by the Servicer. Prior to any Payment Date, the
Servicer may, but will not be required to, advance (each, a "Servicer Advance")
to the Indenture Trustee an amount sufficient to cover delinquencies on all
Leases with respect to the prior Due Period. The Servicer will be reimbursed
for Servicer Advances from Available Funds on the second following Payment
Date. See "Distribution on Notes" above.
Redemption. The Issuer may, at its option, redeem the Notes,
as a whole, at their principal amount, without premium, together with interest
accrued to the date fixed for redemption if on any payment date the Discounted
Present Value of the Performing Leases is less than or equal to 5% of the
Discounted Present Value of the Leases as of the Cut-Off Date (Sections 2.01
and 1.06.). The Issuer will give notice of such redemption to each Noteholder
and the Indenture Trustee at least 30 days before the Payment Date fixed for
such prepayment. Upon deposit of funds necessary to effect such redemption, the
Indenture Trustee shall pay the remaining unpaid principal amount on the Notes
and all accrued and unpaid interest as of the Payment Date fixed for
redemption. See "Description of the Notes--Redemption."
Events of Default and Notice Thereof. The following events
will be defined in the Indenture as "Events of Default" with respect to the
Notes:
(a) default in making Interest Payments when such
become due and payable;
(b) default in making Principal Payments at Stated
Maturity; or
(c) insolvency or bankruptcy events relating to the
Issuer. (Section 6.01)
The Indenture will provide that the Indenture Trustee shall
give the Noteholders notice of all uncured defaults known to it (the term
"default" to include the events specified above without grace periods)
(Sections 6.03 and 7.02).
If an Event of Default occurs, the unpaid principal amount of
the related Notes shall automatically become due and payable together with all
accrued and unpaid interest thereon. The Indenture Trustee may, however, if the
Event of Default involves other than non-payment of principal or interest on
the Notes, not sell the related Leases and Equipment unless such sale is for an
amount greater than or equal to the Outstanding Principal Amount of the Notes
unless directed to do so by the holders of 66 2/3% of the then Outstanding
Principal Amount of the Notes and the Residual Notes (Section 6.03).
Subsequent to an Event of Default and following any
acceleration of the Notes pursuant to the Indenture, any moneys that may then
be held or thereafter received by the Indenture Trustee shall be applied in the
following order of priority, at the date or dates fixed by the Indenture
Trustee and, in case of the distribution of the entire amount due on account of
principal or interest, upon presentation of the Notes and surrender thereof:
First to the payment of all costs and expenses of collection
incurred by the Indenture Trustee and the Noteholders (including the
reasonable fees and expenses of any counsel to the Indenture Trustee
and the Noteholders);
Second if the person then acting as Servicer under the Sales
and Servicing Agreement is not Copelco Capital or an affiliate of
Copelco Capital, to the payment of all Servicer's Fees then due to
such person;
Third first, to the payment of all accrued and unpaid
interest on the Outstanding Principal Amount of the Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes and Class A-4 Notes pro-rata to the
date of payment thereof, including (to the extent permitted by
applicable law) interest on any overdue installment of interest and
principal from the maturity of such installment to the date of payment
thereof at the rate per annum equal to the Class A-1 Interest Rate,
Class A-2 Interest Rate, Class A-3 Interest Rate
39
<PAGE>
and Class A-4 Interest Rate, respectively, second to the payment of
all accrued and unpaid interest on the Outstanding Principal Amount of
the Class B Notes to the date of payment thereof, including (to the
extent permitted by applicable law) interest on any overdue
installment of interest and principal from the maturity of such
installment to the date of payment thereof at the rate per annum equal
to the Class B Interest Rate, third, to the payment of all accrued and
unpaid interest on the Outstanding Principal Amount of the Class C
Notes to the date of payment thereof, including (to the extent
permitted by applicable law) interest on any overdue installment of
interest and principal from the maturity of such installment to the
date of payment thereof at the rate per annum equal to the Class C
Interest Rate, fourth, to the payment of all accrued and unpaid
interest on the Outstanding Principal Amount of the Class D Notes to
the date of payment thereof, including (to the extent permitted by
applicable law) interest on any overdue installment of interest and
principal from the maturity of such installment to the date of payment
thereof at the rate per annum equal to the Class D Interest Rate,
fifth to the payment of all accrued and unpaid interest on the
Outstanding Principal Amount of the Class E Notes to the date of
payment thereof, including (to the extent permitted by applicable law)
interest on any overdue installment of interest and principal from the
maturity of such installment to the date of payment thereof at the
rate per annum equal to the Class E Interest Rate, sixth to the
payment of the Outstanding Principal Amount of the Class A-1 Notes,
seventh, to the payment of the Outstanding Principal Amount of the
Class A-2 Notes, Class A-3 Notes and Class A-4 Notes pro-rata to the
date of payment thereof, eighth, to the payment of the Outstanding
Principal Amount of the Class B Notes to the date of payment thereof,
ninth, to the payment of the Outstanding Principal Amount of the Class
C Notes, tenth, to the payment of the Outstanding Principal Amount of
the Class D Notes, eleventh, to the payment of the Outstanding
Principal Amount of the Class E Note; provided, that the Noteholders
may allocate such payments for interest, principal and premium at
their own discretion, except that no such allocation shall affect the
allocation of such amounts or future payments received by any other
Noteholder;
Fourth to the payment of amounts due under the Residual
Notes;
Fifth to the payment of amounts then due the Indenture
Trustee under the Indenture; and
Sixth to the payment of the remainder, if any, to the Issuer
or any other Person legally entitled thereto (Section 6.06).
The Issuer will be required to furnish annually to the
Indenture Trustee, a statement of certain officers of the Issuer to the effect
that to the best of their knowledge the Issuer is not in default in the
performance and observance of the terms of the Indenture or, if the Issuer is
in default, specifying such default (Section 8.09).
The Indenture will provide that the holders of 66-2/3% in
aggregate principal amount of the Notes and the Residual Notes then outstanding
will have the right to waive certain defaults and, subject to certain
limitations, to direct the time, method and place of conducting any proceeding
for any remedy available to the Indenture Trustee or exercising any trust or
power conferred on the Indenture Trustee (Sections 6.12 and 6.13). The
Indenture will provide that in case an Event of Default shall occur (which
shall not have been cured or waived), the Indenture Trustee will be required to
exercise such of its rights and powers under such Indenture and to use the
degree of care and skill in their exercise that a prudent man would exercise or
use in the conduct of his own affairs (Section 7.01(b)). Subject to such
provisions, the Indenture Trustee will be under no obligation to exercise any
of its rights or powers under such Indenture at the request of any of the
Noteholders unless they shall have offered to the Indenture Trustee reasonable
security or indemnity(Section 6.12). Upon request of a Noteholder, the
Indenture Trustee will provide information as to the outstanding principal
amount of each Class of Notes and the Residual Notes.
Modification of the Indenture. With certain exceptions, under
the Indenture, the rights and obligations of the Issuer and the rights of the
Noteholders may be modified by the Issuer with the consent of the holders of
not less than 66 2/3% in aggregate principal amount of the Notes and the
Residual Notes then outstanding under the Indenture; but no such modification
may be made which would (a) extend the fixed maturity of any Note, or reduce
the principal amount thereof, or reduce the rate or extend the time of payment
of principal or interest thereon, without the consent of the holder of each
Note so affected or (b) reduce the above-stated percentage of Notes, without
the consent of the holders of all Notes then outstanding under such Indenture
(Section 9.02).
40
<PAGE>
Servicer Events of Default. The following events and
conditions shall be defined in the Sales and Servicing Agreement as "Servicer
Events of Default":
(a) failure on the part of the Servicer to remit to the
Indenture Trustee within three Business Days following
the receipt thereof any monies received by the Servicer
required to be remitted to the Indenture Trustee under
the Sales and Servicing Agreement;
(b) so long as Copelco Capital is the Servicer, failure on
the part of Copelco Capital to pay to the Indenture
Trustee on the date when due, any payment required to be
made by Copelco Capital pursuant to the Sales and
Servicing Agreement;
(c) default on the part of either the Servicer or (so long
as Copelco Capital is the Servicer) Copelco Capital in
its observance or performance in any material respect of
certain covenants or agreements in the Sales and
Servicing Agreement;
(d) if any representation or warranty of Copelco Capital
made in the Sales and Servicing Agreement shall prove
to be incorrect in any material respect as of the time
made; provided, however, that the breach of any
representation or warranty made by Copelco
Capital in such Sales and Servicing Agreement will be
deemed to be "material" only if it affects the
Noteholders, the enforceability of the Indenture or of
the Notes; and provided, further, that such material
breach of any representation or warranty made by
Copelco Capital in such Sales and Servicing
Agreement with respect to any of the Leases or the
Equipment subject thereto will not constitute a
Servicer Event of Default if Copelco Capital
repurchases such Lease and Equipment in accordance with
the Sales and Servicing Agreement to the extent
provided therein;
(e) certain insolvency or bankruptcy events relating to the
Servicer;
(f) the failure of the Servicer to make one or more
payments due with respect to aggregate recourse debt or
other obligations exceeding $5,000,000, or the
occurrence of any event or the existence of any
condition, the effect of which event or condition is to
cause (or permit one or more persons to cause) more
than $5,000,000 of aggregate recourse debt or other
obligations of the Servicer to become due before its
(or their) stated maturity or before its (or their)
regularly scheduled dates of payment so long as such
failure, event or condition shall be continuing and
shall not have been waived by the Person or Persons
entitled to performance;
(g) a final judgment or judgments (or decrees or orders)
for the payment of money aggregating in excess of
$5,000,000 and any one of such judgments (or decrees or
orders) has remained unsatisfied and in effect for any
period of 60 consecutive days without a stay of
execution.
Servicer Termination. So long as a Servicer Event of Default
under the Sales and Servicing Agreement is continuing, the Indenture Trustee
shall, upon the instructions of the holders of 66-2/3% in principal amount of
the Notes and the Residual Notes, by notice in writing to the Servicer
terminate all of the rights and obligations of the Servicer (but not Copelco
Capital's obligations which shall survive any such termination) under the Sales
and Servicing Agreement (Section 5.01). On the receipt by the Servicer of such
written notice, all authority and power of the Servicer under the Sales and
Servicing Agreement to take any action with respect to any Lease or Equipment
will cease and the same will pass to and be vested in the Indenture Trustee
pursuant to and under the Sales and Servicing Agreement and the Indenture.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Notes, the aggregate
amount of each interest payment on such Notes and the yield to maturity of such
Notes are directly related to the rate of payments on the underlying Leases.
The payments on such Leases may be in the form of scheduled payments,
Prepayments or liquidations due to default, casualty and other events, which
cannot be specified at present. Any such payments may result in
41
<PAGE>
distributions to Noteholders of amounts which would otherwise have been
distributed over the remaining term of the Leases. In general, the rate of such
payments may be influenced by a number of other factors, including general
economic conditions. The rate of Principal Payments with respect to any Class
may also be affected by any repurchase of the underlying Leases by Copelco
Capital pursuant to the Sales and Servicing Agreement. In such event, the
repurchase price will decrease the Discounted Present Value of the Performing
Leases, causing the corresponding weighted average life of the Notes to
decrease See "Risk Factors--Prepayments."
In the event a Lease becomes a Non-Performing Lease, a
Warranty Lease or an Adjusted Lease, Copelco Capital will have the option to
substitute for the terminated lease another of similar characteristics (a
"Substitute Lease") in an aggregate amount not to exceed 10% of the Discounted
Present Value of the Leases as of the Cut-Off Date with respect to
Non-Performing Leases and in an aggregate amount not to exceed 10% of the
Discounted Present Value of the Leases as of the Cut-Off Date with respect to
Adjusted Leases and Warranty Leases. In addition, in the event of an Early
Lease Termination which has been prepaid in full, Copelco Capital will have the
option to transfer an additional lease of similar characteristics (an
"Additional Lease"). The Substitute Leases and Additional Leases will have a
Discounted Present Value of the Leases equal to or greater than that of the
Leases being modified and replaced and the monthly payments on the Substitute
Leases or Additional Leases will be at least equal to those of the terminated
Leases through the term of such terminated Leases. In the event that an Early
Lease Termination is allowed by Copelco Capital and a Substitute Lease is not
provided, the amount prepaid will be equal to at least the Discounted Present
Value of the terminated Lease, plus any delinquent payments.
The effective yield to holders of the Notes will depend upon,
among other things, the amount of and rate at which principal is paid to such
Noteholders. The after-tax yield to Noteholders may be affected by lags between
the time interest income accrues to Noteholders and the time the related
interest income is received by the Noteholders.
The following chart sets forth the percentage of the Initial
Principal Amount of the Class A-1, Class A-2, Class A-3, Class A-4, Class B,
Class C, Class D, and Class E Notes which would be outstanding on the Payment
Dates set forth below assuming a CPR of 0% and 12%, respectively and were
calculated using the Discount Rate. Such information is hypothetical and is set
forth for illustrative purposes only. The CPR ("Conditional Payment Rate")
assumes that a fraction of the outstanding Series Pool is prepaid on each
Distribution Date, which implies that each Lease in the Series Pool is equally
likely to prepay. This fraction, expressed as a percentage, is annualized to
arrive at the Conditional Payment Rate for the Contract Pool. The CPR measures
prepayments based on the outstanding Discounted Present Value of the Leases,
after the payment of all Scheduled Payments on the Leases during such Due
Period. The CPR further assumes that all Leases are the same size and amortize
at the same rate and that each Lease will be either paid as scheduled or
prepaid in full. The amounts set forth below are based upon the timely receipt
of scheduled monthly Lease payments as of the Cut-Off Date, assume that the
Issuer exercises its option to redeem the Notes and assume the Issuance Date is
August 11, 1998 and the first Payment Date is August 17, 1998.
42
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL AMOUNTS AT THE RESPECTIVE CPR SET FORTH BELOW
===========================================================================================================================
0% CPR
----------------------------------------------------------------------------------------------------------
Payment Date Class A-1 Class A-2 Class A-3 Class A-4 Class B Class C Class D Class E
----------------------------------------------------------------------------------------------------------
% % % % % % % %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance Date 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
August, 1998 91.86% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
September, 1998 83.65% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
October, 1998 75.32% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
November, 1998 66.99% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
December, 1998 58.66% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
January, 1999 50.22% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
February, 1999 41.78% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
March, 1999 33.34% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
April, 1999 24.88% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
May, 1999 16.43% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
June, 1999 8.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
July, 1999 0.00% 99.19% 100.00% 100.00% 99.81% 99.81% 99.81% 99.81%
August, 1999 0.00% 84.53% 100.00% 100.00% 96.46% 96.46% 96.46% 96.46%
September, 1999 0.00% 69.86% 100.00% 100.00% 93.10% 93.10% 93.10% 93.10%
October, 1999 0.00% 55.06% 100.00% 100.00% 89.72% 89.72% 89.72% 89.72%
November, 1999 0.00% 40.34% 100.00% 100.00% 86.35% 86.35% 86.35% 86.35%
December, 1999 0.00% 25.65% 100.00% 100.00% 82.99% 82.99% 82.99% 82.99%
January, 2000 0.00% 10.85% 100.00% 100.00% 79.60% 79.60% 79.60% 79.60%
February, 2000 0.00% 0.00% 97.59% 100.00% 76.23% 76.23% 76.23% 76.23%
March, 2000 0.00% 0.00% 88.46% 100.00% 72.86% 72.86% 72.86% 72.86%
April, 2000 0.00% 0.00% 79.29% 100.00% 69.48% 69.48% 69.48% 69.48%
May, 2000 0.00% 0.00% 70.17% 100.00% 66.12% 66.12% 66.12% 66.12%
June, 2000 0.00% 0.00% 61.20% 100.00% 62.81% 62.81% 62.81% 62.81%
July, 2000 0.00% 0.00% 52.34% 100.00% 59.55% 59.55% 59.55% 59.55%
August, 2000 0.00% 0.00% 43.75% 100.00% 56.38% 56.38% 56.38% 56.38%
September, 2000 0.00% 0.00% 35.35% 100.00% 53.29% 53.29% 53.29% 53.29%
October, 2000 0.00% 0.00% 27.16% 100.00% 50.27% 50.27% 50.27% 50.27%
November, 2000 0.00% 0.00% 19.23% 100.00% 47.34% 47.34% 47.34% 47.34%
December, 2000 0.00% 0.00% 11.61% 100.00% 44.53% 44.53% 44.53% 44.53%
January, 2001 0.00% 0.00% 4.19% 100.00% 41.80% 41.80% 41.80% 41.80%
February, 2001 0.00% 0.00% 0.00% 97.33% 39.18% 39.18% 39.18% 39.18%
March, 2001 0.00% 0.00% 0.00% 91.13% 36.68% 36.68% 36.68% 36.68%
April, 2001 0.00% 0.00% 0.00% 85.22% 34.31% 34.31% 34.31% 34.31%
May, 2001 0.00% 0.00% 0.00% 79.65% 32.06% 32.06% 32.06% 32.06%
June, 2001 0.00% 0.00% 0.00% 74.40% 29.95% 29.95% 29.95% 29.95%
July, 2001 0.00% 0.00% 0.00% 69.41% 27.94% 27.94% 27.94% 27.94%
August, 2001 0.00% 0.00% 0.00% 64.65% 26.02% 26.02% 26.02% 26.02%
September, 2001 0.00% 0.00% 0.00% 59.99% 24.15% 24.15% 24.15% 24.15%
October, 2001 0.00% 0.00% 0.00% 55.43% 22.31% 22.31% 22.31% 22.31%
November, 2001 0.00% 0.00% 0.00% 51.05% 20.55% 20.55% 20.55% 20.55%
December, 2001 0.00% 0.00% 0.00% 46.75% 18.82% 18.82% 18.82% 18.82%
January, 2002 0.00% 0.00% 0.00% 42.52% 17.12% 17.12% 17.12% 17.12%
February, 2002 0.00% 0.00% 0.00% 38.46% 15.48% 15.48% 15.48% 15.48%
March, 2002 0.00% 0.00% 0.00% 34.51% 13.89% 13.89% 13.89% 13.89%
April, 2002 0.00% 0.00% 0.00% 30.03% 12.43% 13.89% 13.89% 13.89%
May, 2002 0.00% 0.00% 0.00% 25.57% 12.43% 13.89% 13.89% 13.89%
June, 2002 0.00% 0.00% 0.00% 21.30% 12.43% 13.89% 13.89% 13.89%
July, 2002 0.00% 0.00% 0.00% 17.35% 12.43% 13.89% 13.89% 13.89%
August, 2002 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
WEIGHTED
AVERAGE
LIFE(1)(YEARS)
To Call: 0.47 1.25 2.00 3.33 2.38 2.38 2.38 2.38
To Maturity: 0.47 1.25 2.00 3.36 2.44 2.45 2.47 2.49
</TABLE>
(1) The weighted average life of a Class A-1 Note, Class A-2 Note, Class A-3
Note, Class A-4 Note, Class B Note, Class C Note, Class D Note, and Class E
Note is determined by (a) multiplying the amount of cash distributions in
reduction of the Outstanding Principal Amount of the respective Offered
Note by the number of years from the Issuance Date to such Payment Date,
(b) adding the results, and (c) dividing the sum by the respective Initial
Principal Amount.
43
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL AMOUNTS AT THE RESPECTIVE CPR SET FORTH BELOW
==========================================================================================================================
12% CPR
---------------------------------------------------------------------------------------------------------
Payment Date Class A-1 Class A-2 Class A-3 Class A-4 Class B Class C Class D Class E
---------------------------------------------------------------------------------------------------------
% % % % % % % %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance Date 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
August, 1998 88.23% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
September, 1998 76.60% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
October, 1998 65.06% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
November, 1998 53.73% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
December, 1998 42.61% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
January, 1999 31.58% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
February, 1999 20.75% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
March, 1999 10.12% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
April, 1999 0.00% 99.42% 100.00% 100.00% 99.87% 99.87% 99.87% 99.87%
May, 1999 0.00% 81.57% 100.00% 100.00% 95.78% 95.78% 95.78% 95.78%
June, 1999 0.00% 64.07% 100.00% 100.00% 91.78% 91.78% 91.78% 91.78%
July, 1999 0.00% 46.84% 100.00% 100.00% 87.84% 87.84% 87.84% 87.84%
August, 1999 0.00% 30.01% 100.00% 100.00% 83.99% 83.99% 83.99% 83.99%
September, 1999 0.00% 13.48% 100.00% 100.00% 80.20% 80.20% 80.20% 80.20%
October, 1999 0.00% 0.00% 98.23% 100.00% 76.47% 76.47% 76.47% 76.47%
November, 1999 0.00% 0.00% 88.33% 100.00% 72.82% 72.82% 72.82% 72.82%
December, 1999 0.00% 0.00% 78.63% 100.00% 69.24% 69.24% 69.24% 69.24%
January, 2000 0.00% 0.00% 69.06% 100.00% 65.71% 65.71% 65.71% 65.71%
February, 2000 0.00% 0.00% 59.70% 100.00% 62.26% 62.26% 62.26% 62.26%
March, 2000 0.00% 0.00% 50.53% 100.00% 58.88% 58.88% 58.88% 58.88%
April, 2000 0.00% 0.00% 41.51% 100.00% 55.55% 55.55% 55.55% 55.55%
May, 2000 0.00% 0.00% 32.70% 100.00% 52.31% 52.31% 52.31% 52.31%
June, 2000 0.00% 0.00% 24.17% 100.00% 49.16% 49.16% 49.16% 49.16%
July, 2000 0.00% 0.00% 15.90% 100.00% 46.11% 46.11% 46.11% 46.11%
August, 2000 0.00% 0.00% 7.99% 100.00% 43.20% 43.20% 43.20% 43.20%
September, 2000 0.00% 0.00% 0.38% 100.00% 40.39% 40.39% 40.39% 40.39%
October, 2000 0.00% 0.00% 0.00% 93.66% 37.70% 37.70% 37.70% 37.70%
November, 2000 0.00% 0.00% 0.00% 87.28% 35.13% 35.13% 35.13% 35.13%
December, 2000 0.00% 0.00% 0.00% 81.23% 32.70% 32.70% 32.70% 32.70%
January, 2001 0.00% 0.00% 0.00% 75.43% 30.37% 30.37% 30.37% 30.37%
February, 2001 0.00% 0.00% 0.00% 69.96% 28.16% 28.16% 28.16% 28.16%
March, 2001 0.00% 0.00% 0.00% 64.81% 26.09% 26.09% 26.09% 26.09%
April, 2001 0.00% 0.00% 0.00% 59.96% 24.14% 24.14% 24.14% 24.14%
May, 2001 0.00% 0.00% 0.00% 55.45% 22.32% 22.32% 22.32% 22.32%
June, 2001 0.00% 0.00% 0.00% 51.25% 20.63% 20.63% 20.63% 20.63%
July, 2001 0.00% 0.00% 0.00% 47.30% 19.04% 19.04% 19.04% 19.04%
August, 2001 0.00% 0.00% 0.00% 43.59% 17.55% 17.55% 17.55% 17.55%
September, 2001 0.00% 0.00% 0.00% 40.02% 16.11% 16.11% 16.11% 16.11%
October, 2001 0.00% 0.00% 0.00% 36.59% 14.73% 14.73% 14.73% 14.73%
November, 2001 0.00% 0.00% 0.00% 33.33% 13.42% 13.42% 13.42% 13.42%
December, 2001 0.00% 0.00% 0.00% 29.55% 13.42% 13.42% 13.42% 13.42%
January, 2002 0.00% 0.00% 0.00% 25.88% 13.42% 13.42% 13.42% 13.42%
February, 2002 0.00% 0.00% 0.00% 22.42% 13.42% 13.42% 13.42% 13.42%
March, 2002 0.00% 0.00% 0.00% 19.11% 13.42% 13.42% 13.42% 13.42%
April, 2002 0.00% 0.00% 0.00% 15.96% 13.42% 13.42% 13.42% 13.42%
May, 2002 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
June, 2002 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
July, 2002 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
August, 2002 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
WEIGHTED
AVERAGE
LIFE(1)(YEARS)
To Call: 0.34 0.96 1.65 2.97 2.04 2.04 2.04 2.04
To Maturity: 0.34 0.96 1.65 3.01 2.12 2.13 2.14 2.16
</TABLE>
(1) The weighted average life of a Class A-1 Note, Class A-2 Note, Class A-3
Note, Class A-4 Note, Class B Note, Class C Note, Class D Note, and Class E
Note is determined by (a) multiplying the amount of cash distributions in
reduction of the Outstanding Principal Amount of the respective Offered
Note by the number of years from the Issuance Date to such Payment Date,
(b) adding the results, and (c) dividing the sum by the respective Initial
Principal Amount.
44
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SECURITY FOR THE NOTES
General. Repayment of the Notes will be secured by (a) a first
priority security interest in the underlying Leases perfected both by filing UCC
financing statements against the Issuer and Copelco Capital and by taking
possession of the respective Lease documents, (b) a security interest in the
related Equipment owned by the Issuer and an assignment of the Issuer's security
interest in such Equipment subject to Nominal Buy-Out Leases, which security
interest was originally perfected by Copelco Capital (for Equipment with an
original cost in excess of $25,000 which assignment will be recorded in the
manner described below) and (c) all funds in the Collection Account and the
Reserve Account.
THE INDENTURE TRUSTEE
Manufacturers and Traders Trust Company will be the Indenture
Trustee under the Indenture. Copelco Capital, as Seller or Servicer, and its
affiliates may from time to time enter into normal banking and Indenture Trustee
relationships with the Indenture Trustee and its affiliates. The Indenture
Trustee, the Servicer and any of their respective affiliates may hold Notes in
their own names. In addition, for purposes of meeting the legal requirements of
certain local jurisdictions, the Indenture Trustee shall have the power to
appoint a co-Indenture Trustee or a separate Indenture Trustee under the
Indenture. In the event of such appointment, all rights, powers, duties and
obligations conferred or imposed upon the Indenture Trustee by the Indenture
will be conferred or imposed upon the Indenture Trustee and such separate
Indenture Trustee or co-Indenture Trustee jointly, or in any jurisdiction in
which the Indenture Trustee shall be incompetent or unqualified to perform
certain acts, singly upon such separate Indenture Trustee or co-Indenture
Trustee, who shall exercise and perform such rights, powers, duties and
obligations solely at the direction of the Indenture Trustee.
The Indenture Trustee may resign at any time, in which event
the Issuer will be obligated to appoint a successor Indenture Trustee. The
Issuer may also remove each Indenture Trustee if such Indenture Trustee ceases
to be eligible to continue as such under the Indenture, fails to perform in any
material respect its obligations under such Indenture, or becomes insolvent. In
such circumstances, the Issuer will be obligated to appoint a successor
Indenture Trustee. Any resignation or removal of a Indenture Trustee and
appointment of a successor Indenture Trustee will not become effective until
acceptance of the appointment by the successor Indenture Trustee.
THE OWNER TRUSTEE
Wilmington Trust Company, which will serve as the Owner Trustee under the Trust
Agreement, is a Delaware banking corporation and its principal offices are
located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001.
CERTAIN LEGAL MATTERS AFFECTING A LESSEE'S
RIGHTS AND OBLIGATIONS
General. The Leases are triple-net leases, requiring the
Lessees to pay all taxes, maintenance and insurance associated with the
Equipment, and are primarily non-cancelable by the Lessees.
The Leases are "hell or high water" leases, under which the
obligations of the Lessee are absolute and unconditional, regardless of any
defense, setoff or abatement which the Lessee may have against Copelco Capital,
as Seller or Servicer, the Issuer, or any other person or entity whatsoever.
Defaults under the Leases are generally the result of failure
to pay amounts when due, failure to observe other covenants in the Lease,
misrepresentations by, or the insolvency, bankruptcy or appointment of a trustee
or receiver for the Lessee under a Lease. The remedies of the lessor (and the
Issuer as assignee) following a notice and cure period are generally to seek to
enforce the performance by the Lessee of the terms and covenants of the Lease
(including the Lessee's obligation to make scheduled payments) or recover
damages for the breach thereof, to accelerate the balance of the remaining
scheduled payments paid to terminate the rights of the Lessee under such Lease.
Although the Leases permit the lessor to repossess and dispose of the related
Equipment in the event of a lease default, and to credit such proceeds against
the Lessee's liabilities thereunder, such remedies may be limited where the
Lessee thereunder is subject to bankruptcy, or other insolvency proceedings.
45
<PAGE>
UCC and Bankruptcy Considerations. Pursuant to the Sales and
Servicing Agreement, Copelco Capital will sell the Leases to the Sponsor, make a
capital contribution to the Sponsor of Equipment owned by Copelco Capital and
subject to the Leases, and assign its security interests in the Equipment
subject to Nominal Buy-Out Leases. The Sponsor will in turn transfer its
interests in the Leases and Equipment to the Issuer. Copelco Capital will
warrant that each of the transfer of the Leases from Copelco Capital to the
Sponsor and from the Sponsor to the Issuer is an absolute assignment, that the
contributions of its rights in the Equipment is a valid transfer of Copelco
Capital's title to the Equipment and that Copelco Capital is either the owner of
the Equipment or has a valid perfected first priority security interest in the
Equipment (for Leases with leased Equipment having an original equipment cost in
excess of $25,000), including Equipment, subject to Nominal Buy-Out Leases, and
accordingly, Copelco Capital has filed UCC financing statements in its favor
against Lessees in respect of all Equipment in the Series Pool with an original
Equipment cost in excess of $25,000. No action will be taken to perfect the
interest of Copelco Capital in any Equipment in the Series Pool with an original
Equipment cost of less than $25,000. In addition, UCC financing statements
identifying security interests in the Equipment as transferred to, or obtained
by, the Issuer or the Indenture Trustee and UCC Financing Statements identifying
equipment owned by Copelco Capital, transferred to the Issuer and pledged to the
Indenture Trustee will be filed in favor of the Issuer or the Indenture Trustee
in the Filing Locations. In the event of the repossession and resale of
Equipment subject to a superior lien, the senior lienholder would be entitled to
be paid the full amount of the indebtedness owed to it out of the sale proceeds
before such proceeds could be applied to the payment of claims by the Servicer
on behalf of the Issuer. Certain statutory provisions, including federal and
state bankruptcy and insolvency laws, may limit the ability of the Servicer to
repossess and resell collateral or obtain a deficiency judgment in the event of
a Lessee default. In the event of the bankruptcy or reorganization of a Lessee,
or Copelco Capital, as Seller or Servicer, various provisions of the Bankruptcy
Code of 1978, 11 U.S.Css.ss. 101-1330 (the "Bankruptcy Code"), and related laws
may interfere with, delay or eliminate the ability of Copelco Capital or the
Issuer to enforce its rights under the Leases.
In the case of operating leases, the Bankruptcy Code grants to
the bankruptcy trustee or the debtor-in-possession a right to elect to assume or
reject any executory contract or unexpired lease. Any rejection of such a lease
or contract constitutes a breach of such lease or contract, entitling the
nonbreaching party to a claim for damages for breach of contract. The net
proceeds from any resulting judgment would be deposited by the Servicer into the
Collection Account and allocated to the Noteholders as more fully described
herein. Upon the bankruptcy of a Lessee, if the bankruptcy trustee or
debtor-in-possession elected to reject a Lease, the flow of scheduled payments
to Noteholders would cease. In the event that, as a result of the bankruptcy of
a Lessee, the Servicer is prevented from collecting scheduled payments with
respect to Leases and such Leases become Non-Performing Leases, no recourse
would be available against Copelco Capital (except for misrepresentation or
breach of warranty) and the Noteholders could suffer a loss with respect to the
Notes. Similarly, upon the bankruptcy of the Issuer, if the bankruptcy trustee
or debtor-in-possession elected to reject a Lease, the flow of Lease payments to
the Issuer and the Noteholders would cease. As noted above, however, the Issuer
has been structured so that the filing of a bankruptcy petition with respect to
it is unlikely. See "The Issuer."
These UCC and bankruptcy provisions, in addition to the
possible decrease in value of a repossessed item of Equipment, may limit the
amount realized on the sale of Equipment to less than the amount due on the
related Lease.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of material federal
income tax consequences to the original purchasers of the Offered Notes of the
purchase, ownership and disposition of the Offered Notes. It does not purport to
discuss all federal income tax consequences that may be applicable to investment
in the Offered Notes or to particular categories of investors, some of which may
be subject to special rules. In particular, this discussion applies only to
institutional investors that purchase Offered Notes directly from the Issuer and
hold the Offered Notes as capital assets.
The discussion that follows, and the opinion set forth below
of Dewey Ballantine LLP, special tax counsel to the Issuer ("Tax Counsel"), are
based on the provisions of the Internal Revenue Code of 1986, as amended (the
"Code") and treasury regulations promulgated thereunder as in effect on the date
hereof and on existing judicial and administrative interpretations thereof.
These authorities are subject to change and to differing
46
<PAGE>
interpretations, which could apply retroactively. The opinion of Tax Counsel is
not binding on the courts or the Internal Revenue Service (the "IRS"). Potential
investors should consult their own tax advisors in determining the federal,
state, local, foreign and any other tax consequences to them of the purchase,
ownership and disposition of the Offered Notes.
Tax Counsel has prepared the following discussion and is of
the opinion that such discussion is correct in all material respects.
Characterization of the Offered Notes as Indebtedness. In the
opinion of Tax Counsel, although no transaction closely comparable to that
contemplated herein has been the subject of any treasury regulation, revenue
ruling or judicial decision, based on the application of existing law to the
facts as set forth in the applicable agreements, the proper treatment of the
Offered Notes is as indebtedness for federal income tax purposes.
Although it is the opinion of Tax Counsel that the Offered
Notes are properly characterized as indebtedness for federal income tax
purposes, no assurance can be given that such characterization of the Offered
Notes will prevail. If the Offered Notes were treated as an ownership interest
in the Leases, all income on such Leases would be income to the holders of the
Offered Notes, and related fees and expenses would generally be deductible
(subject to certain limitations on the deductibility of miscellaneous itemized
deductions by individuals) and certain market discount and premium provisions of
the Code might apply to a purchase of the Offered Notes.
If, alternatively, the Offered Notes were treated as an equity
interest in the Issuer, distributions on the Offered Notes probably would not be
deductible in computing the taxable income of the Issuer and all or a part of
distributions to the holders of the Offered Notes probably would be treated as
dividend income to those holders. Such an Issuer-level tax could result in a
reduced amount of cash available for distributions to the holders of the Offered
Notes.
Taxation of Interest Income of Noteholders. If characterized
as indebtedness, interest on the Offered Notes will be taxable as ordinary
income for federal income tax purposes when received by Noteholders using the
cash method of accounting and when accrued by Noteholders using the accrual
method of accounting. Interest received on the Offered Notes also may constitute
"investment income" for purposes of certain limitations of the Code concerning
the deductibility of investment interest expense.
Original Issue Discount. It is not anticipated that the
Offered Notes will have any original issue discount ("OID") other than possibly
OID within a de minimis exception and that accordingly the provisions of
sections 1271 through 1273 and 1275 of the Code generally will not apply to the
Offered Notes. OID will be considered de minimis if it is less than 0.25% of the
principal amount of Note multiplied by its expected weighted average life.
Market Discount. A subsequent purchaser who buys a Note for
less than its principal amount may be subject to the "market discount" rules of
Sections 1276 through 1278 of the Code. If a subsequent purchaser of a Note
disposes of such Note (including certain nontaxable dispositions such as a
gift), or receives a principal payment, any gain upon such sale or other
disposition will be recognized, or the amount of such principal payment will be
treated, as ordinary income to the extent of any "market discount" accrued for
the period that such purchaser holds the Note. Such holder may instead elect to
include market discount in income as it accrues with respect to all debt
instruments acquired in the year of acquisition of the Offered Notes and
thereafter. Market discount generally will equal the excess, if any, of the
then-current unpaid principal balance of the Note over the purchaser's basis in
the Note immediately after such purchaser acquired the Note. In general, market
discount on a Note will be treated as accruing over the term of such Note in the
ratio of interest for the current period over the sum of such current interest
and the expected amount of all remaining interest payments, or at the election
of the holder, under a constant yield method. At the request of a holder of a
Note, information will be made available that will allow the holder to compute
the accrual of market discount under the first method described in the preceding
sentence.
The market discount rules also provide that a holder who
incurs or continues indebtedness to acquire a Note at a market discount may be
required to defer the deduction of all or a portion of the interest on such
indebtedness until the corresponding amount of market discount is included in
income.
47
<PAGE>
Notwithstanding the above rules, market discount on a Note
will be considered to be zero if it is less than a de minimis amount, which is
0.25% of the remaining principal balance of the Note multiplied by its expected
weighted average remaining life. If OID or market discount is de minimis, the
actual amount of discount must be allocated to the remaining principal
distributions on the Note and, when each such distribution is received, capital
gain equal to the discount allocated to such distribution will be recognized.
Market Premium. A subsequent purchaser who buys a Note for
more than its principal amount generally will be considered to have purchased
the Note at a premium. Such holder may amortize such premium, using a constant
yield method, over the remaining term of the Note and, except as future
regulations may otherwise provide, may apply such amortized amounts to reduce
the amount of interest income reportable with respect to such Note over the
period from the purchase date to the date of maturity of the Note. Legislative
history of the Tax Reform Act of 1986 indicates that the amortization of such
premium on an obligation that provides for partial principal payments prior to
maturity should be governed by the methods for accrual of market discount on
such an obligation (described above). A holder that elects to amortize such
premium must reduce tax basis in the related obligation by the amount of the
aggregate deductions (or interest offsets) allowable for amortizable premium. If
a debt instrument purchased at a premium is redeemed in full prior to its
maturity, a purchaser who has elected to amortize premium should be entitled to
a deduction for any remaining unamortized premium in the taxable year of
redemption.
Sale or Exchange of Offered Notes. If a Note is sold or
exchanged, the seller of the Note will recognize gain or loss equal to the
difference between the amount realized on the sale or exchange and the adjusted
basis of the Note. The adjusted basis of a Note will generally equal its cost,
increased by any OID or market discount includible in income with respect to the
Note through the date of sale and reduced by any principal payments previously
received with respect to the Note, any payments allocable to previously accrued
OID or market discount and any amortized market premium. Subject to the market
discount rules, gain or loss will generally be capital gain or loss if the Note
was held as a capital asset. Capital losses generally may be used only to offset
capital gains.
Backup Withholding with Respect to Offered Notes. Payments of
interest and principal, together with payments of proceeds from the sale of
Offered Notes, may be subject to the "backup withholding tax" under Section 3406
of the Code at a rate of 31% if recipients of such payments fail to furnish to
the payor certain information, including their taxpayer identification numbers,
or otherwise fail to establish an exemption from such tax. Any amounts deducted
and withheld from a payment to a recipient would be allowed as a credit against
such recipient's federal income tax. Furthermore, certain penalties may be
imposed by the IRS on a recipient of payments that is required to supply
information but that does not do so in the proper manner.
Foreign Investors in Offered Notes Certain U.S. Federal Income
Tax Documentation Requirements. A beneficial owner of Offered Notes holding
securities through CEDEL of Euroclear (or through DTC if the holder has an
address outside the U.S.) will be subject to the 30% U.S. withholding tax that
generally applies to payments of interest (including original issue discount) on
registered debt issued by U.S. Persons (as defined below), unless (i) each
clearing system, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business in the chain of
intermediaries between such beneficial owner and the U.S. entity required to
withhold tax complies with applicable certification requirements and (ii) such
beneficial owner takes one of the following steps to obtain an exemption or
reduced tax rate:
Exemption for Non-U.S. Persons (Form W-8). Beneficial Owners
of Offered Notes that are Non-U.S. Persons (as defined below) can obtain a
complete exemption from the withholding tax by filing a signed Form W-8
(Certificates of Foreign Status). If the information shown on Form W-8 changes,
a new Form W-8 must be filed within 30 days of such change.
Exemption for Non-U.S. Persons with effectively connected
income (Form 4224). A Non-U.S. Person (as defined below), including a non-U.S.
corporation or bank with a U.S. branch, for which the interest income is
effectively connected with its conduct of a trade or business in the United
States, can obtain an exemption from the withholding tax by filing Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States).
48
<PAGE>
Exemption or reduced rate for non-U.S. Persons resident in
treaty countries (Form 1001). Non-U.S. Persons residing in a country that has a
tax treaty with the United States can obtain an exemption or reduced tax rate
(depending on the treaty terms) by filing Form 1001 (Ownership, Exemption or
Reduced Rate Certificates). If the treaty provides only for a reduced rate,
withholding tax will be imposed at that rate unless the filer alternatively
files Form W-8. Form 1001 may be filed by Certificate Owners or their agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can
obtain a complete exemption from the withholding tax by filing Form W-9
(Payer's Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Owner of a
Note or, in the case of a Form 1001 or a Form 4224 filer, his agent, files by
submitting the appropriate form to the person through whom it holds (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
On April 22, 1996 the IRS issued proposed regulations relating
to withholding, backup withholding and information reporting that, if adopted in
their current form would, among other things, unify current certification
procedures and forms and clarify certain reliance standards. The regulations are
proposed to be effective for payments made after December 31, 1997 but provide
that certificates issued on or before the date that is 60 days after the
proposed regulations are made final will continue to be valid until they expire.
Proposed regulations, however, are subject to change prior to their adoption in
final form.
The term "U.S. Person" means (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity organized in or
under the laws of the United States or any political subdivision thereof, (iii)
an estate that is subject to U.S. federal income tax regardless of the source of
its income. The term "Non-U.S. Person" means any person who is not a U.S. Person
or (iv) a trust if a court within the United States can exercise primary
supervision over its administration and at least one United States fiduciary has
the authority to control all substantial decisions of the trust. This summary
does not deal with all aspects of U.S. federal income tax withholding that may
be relevant to foreign holders of the Offered Notes. Investors are advised to
consult their own tax advisors for specific tax advice concerning their holding
and disposing of the Offered Notes.
State, Local and Other Taxes. Investors should consult their
own tax advisors regarding whether the purchase of the Offered Notes, either
alone or in conjunction with an investor's other activities, may subject an
investor to any state or local taxes based on an assertion that the investor is
either "doing business" in, or deriving income from a source located in, any
state or local jurisdiction. Additionally, potential investors should consider
the state, local and other tax consequences of purchasing, owning or disposing
of a Note. State and local tax laws may differ substantially from the
corresponding federal tax law, and the foregoing discussion does not purport to
describe any aspect of the tax laws of any state or other jurisdiction.
Accordingly, potential investors should consult their own tax advisors with
regard to such matters.
THE FEDERAL AND STATE INCOME TAX DISCUSSIONS SET FORTH ABOVE
ARE INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING
UPON A NOTEHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE OFFERED NOTES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS OR IN THE INTERPRETATIONS
THEREOF.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), imposes certain requirements and restrictions on those
pension and other employee benefits plans to which it applies and on those
persons who are fiduciaries with respect to such plans. In accordance with
ERISA's fiduciary standards, before purchasing the Offered Notes, a fiduciary
should determine whether such an investment is permitted under the documents and
instruments governing the plan and is appropriate for the plan in view of its
overall investment policy and the composition of its portfolio.
49
<PAGE>
Section 406 of ERISA and Section 4975 of the Code prohibit
certain transactions involving the assets of certain plans subject thereto (each
"Benefit Plan") and persons who are "parties in interest," within the meaning of
ERISA, or "disqualified persons," within the meaning of the Code. Certain
transactions involving the purchase, holding or transfer of the Offered Notes
might be deemed to constitute prohibited transactions under ERISA and the Code
if assets of the Issuer were deemed to be assets of a Benefit Plan. Under
regulations issued by the United States Department of Labor set forth in 29
C.F.R. ss. 2510.3101 (the "Plan Asset Regulations"), the assets of the Issuer
would be treated as plan assets of a Benefit Plan for the purposes of ERISA and
the Code only if the Benefit Plan acquires an "Equity Interest" in the Issuer
and none of the exceptions contained in the Plan Asset Regulations is
applicable. An Equity Interest is defined under the Plan Asset Regulations as an
interest other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features. It is
anticipated that the Offered Notes should be treated as indebtedness without
substantial equity features for purposes of the Plan Asset Regulations. However,
even if the Offered Notes are treated as indebtedness for such purposes, the
acquisition or holding of Offered Notes by or on behalf of a Benefit Plan could
be considered to give rise to a prohibited transaction if the Issuer or any of
its respective affiliates is or becomes a party in interest or disqualified
person with respect to such Benefit Plan. In this event, certain exemptions from
the prohibited transaction rules could be applicable depending on the type and
circumstances of the plan fiduciary making the decision to acquire a Note.
Included among these exemptions are: Prohibited Transaction Class Exemption
("PTCE") 90-1, regarding investments by insurance company pooled separate
accounts; PTCE 91-38 regarding investments by bank collective investment funds;
PTCE 84-14, regarding transactions effected by "qualified professional asset
managers," PTCE 95-60, regarding investments by insurance company general
accounts and PTCE 96-23 regarding transactions effected by In-House Asset
Managers. Each investor using assets of a Benefit Plan which acquires the
Offered Notes, or to whom the Offered Notes are transferred, will be deemed to
have represented that the acquisition and continued holding of the Offered Notes
will be covered by one of the exemptions listed above or another Department of
Labor class exemption.
Insurance companies considering the purchase of the Offered
Notes should also consult their own counsel as to the application of the
recent decision by the United States Supreme Court in John Hancock Mutual
Life Insurance Co. v. Harris Trust and Savings Bank (114 S. Ct. 517
(1993)) to such a purchase. Under that decision, assets held in an insurance
company's general account may be deemed assets of ERISA plans under certain
circumstances.
Due to the complexity of these rules and the penalties imposed
upon persons involved in prohibited transactions, it is particularly important
that a fiduciary investing assets of an ERISA plan consult with counsel
regarding the consequences under ERISA of the acquisition and holding of Offered
Notes, including the availability of any administrative exemptions from the
prohibited transaction rules.
UNDERWRITING
Under the terms and subject to the conditions set forth in the
underwriting agreement (the "Underwriting Agreement") for the sale of the
Offered Notes, the Issuer has agreed to sell and First Union Capital Markets, a
division of Wheat Securities Inc. ("First Union Capital Markets"), Lehman
Brothers and Prudential Securities Incorporated (the "Underwriters") have agreed
to purchase the principal amount of the Offered Notes set forth below:
<TABLE>
<CAPTION>
Underwriters of the Class A Notes Principal Amount of Principal Amount of Principal Amount Principal Amount of
Class A-1 Notes Class A-2 Notes Class A-3 Notes Class A-4 Notes
<S> <C> <C> <C> <C>
First Union Capital Markets 97,331,334.00 46,104,316.00 74,279,176.00 81,109,445.00
Lehman Brothers 48,665,667.00 23,052,158.00 37,139,588.00 40,554,722.50
Prudential Securities 48,665,667.00 23,052,158.00 37,139,588.00 40,554,722.50
Incorporated
</TABLE>
First Union Capital Markets will be the sole underwriter in
connection with the Class B, Class C and Class D Notes.
In the Underwriting Agreement, the Underwriters have agreed to
purchase the Offered Notes in the amounts set forth above, subject to the terms
and conditions set forth therein. The Issuer has been advised by First Union
Capital Markets, as the representative of the Underwriters, that the
Underwriters propose initially to offer the Notes to the public at the
respective public offering prices set forth on the cover page of this
Prospectus,
50
<PAGE>
and to certain dealers at such price, less a concession not in excess of .06%
per Class A-1 Note, .09% per Class A-2 Note, .12% per Class A-3 Note, .15% per
Class A-4 Note, .15% per Class B Note, .18% per Class C Note and .24% per Class
D Note. The Underwriters may allow and such dealers may reallow to other dealers
a discount not in excess of .03% per Class A-1 Note, .045% per Class A-2 Note,
.06% per Class A-3 Note, .075% per Class A-4 Note, .075% per Class B Note, .09%
per Class C Note and .12% per Class D Note. After the initial public offering,
the public offering price may be changed.
The Underwriters will each represent and agree that:
(a) it has not offered or sold, and, prior to the expiry of
six months from the Closing Date, will not offer or
sell, any Offered Notes to persons in the United
Kingdom, except to persons whose ordinary activities
involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for
purposes of their business, or otherwise in
circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities
Regulations 1995;
(b) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the
Offered Notes in, from or otherwise involving the United
Kingdom; and
(c) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by
it in connection with the issue of the Offered Notes to
a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or persons to
whom such document may otherwise lawfully be issued,
distributed or passed on.
The Issuer has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Issuer has been advised by the Underwriters that the
Underwriters presently intend to make a market in the Offered Notes, as
permitted by applicable laws and regulations. The Underwriters are not
obligated, however, to make a market in the Offered Notes and any such market
making may be discontinued at any time at the sole discretion of the
Underwriters. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the Offered Notes.
In connection with the offering of the Offered Notes, certain
Underwriters and selling group members and their respective affiliates may
engage in transactions that stabilize, maintain or otherwise affect the market
price of the Offered Notes. Such transactions may include stabilization
transactions effected in accordance with Rule 104 of Regulation M, pursuant to
which such person may bid for or purchase the Offered Notes for the purpose of
stabilizing its market price. In addition, First Union, on behalf of the
Underwriters, may impose "penalty bids" under contractual arrangements with the
Underwriters whereby it may reclaim from an Underwriter (or dealer participating
in the offering) for the account of the other Underwriters, the selling
concession with respect to the Offered Notes that it distributed in the offering
but subsequently purchased for the account of the Underwriters in the open
market. Any of the transactions described in this paragraph may result in the
maintenance of the price of the Offered Notes at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph is required, and, if they are taken, may be discontinued at any time
without notice.
First Union Capital Markets is serving as the placement agent
for the Class E Notes and the Residual Notes.
LEGAL MATTERS
Certain legal matters relating to the Notes will be passed
upon for Copelco Capital, Inc., the Sponsor and the Issuer by Spencer N.
Lempert, General Counsel of Capital Financial Services Group, Inc., and for
Copelco Capital, the Sponsor, the Issuer and the Underwriter by Dewey Ballantine
LLP, New York, New York.
51
<PAGE>
RATING OF THE OFFERED NOTES
It is a condition to the issuance of the Offered Notes that
the Class A-1 Notes be rated at least "A-1+", "D-1+" and "F1+/AAA" , that the
Class A-2, A-3 and A-4 Notes be rated at least "AAA", "AAA" and "AAA", that the
Class B Notes be rated at least "AA", "AA+" and "AA", that the Class C Notes be
rated at least "A", "A+" and "A+" and that the Class D Notes be rated at least
"BBB", "BBB+" and "BBB+" by Standard & Poor's Ratings Group ("S&P"), Duff &
Phelps Credit Ratings Co. ("DCR") and Fitch IBCA, Inc. ("Fitch"), respectively
(each a "Rating Agency").
Such rating will reflect only the views of the Rating Agency
and will be based primarily on the amount of subordination, the availability of
funds on deposit in the Reserve Account and the value of the Leases and
Equipment. The ratings are not a recommendation to purchase, hold or sell the
related Offered Notes, inasmuch as such ratings do not comment as to market
price or suitability for a particular investor. There is no assurance that any
such rating will continue for any period of time or that it will not be lowered
or withdrawn entirely by the Rating Agency if, in its judgment, circumstances so
warrant. A revision or withdrawal of such rating may have an adverse affect on
the market price of the Offered Notes. The rating of the Offered Notes addresses
the likelihood of the timely payment of interest and the ultimate payment of
principal on the Offered Notes by the Stated Maturity Date. The rating does not
address the rate of Prepayments that may be experienced on the Leases and,
therefore, does not address the effect of the rate of Lease Prepayments on the
return of principal to the Offered Noteholders.
52
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
Term(s) Page(s)
<S> <C>
Additional Lease.............................................................................................12, 42
Adjusted Lease...................................................................................................12
Available Funds..............................................................................................13, 36
Available Funds Shortfall........................................................................................37
Available Reserve Amount.....................................................................................16, 37
Bankruptcy Code..................................................................................................46
Benefit Plan.....................................................................................................50
Booked Residual Value............................................................................................32
Casualty.........................................................................................................36
Casualty Payment.................................................................................................36
Cede..............................................................................................................3
CEDEL.............................................................................................................3
Cedel Participants...............................................................................................34
Certificates......................................................................................................2
Class.............................................................................................................1
Class A Initial Principal Amount..................................................................................5
Class A Noteholders...............................................................................................2
Class A Notes..................................................................................................1, 4
Class A Percentage................................................................................................9
Class A Principal Payment.........................................................................................8
Class A Target Investor Principal Amount..........................................................................9
Class A-1 Initial Principal Amount................................................................................5
Class A-1 Interest Rate...........................................................................................5
Class A-1 Notes................................................................................................1, 4
Class A-1 Stated Maturity Date.................................................................................2, 6
Class A-2 Initial Principal Amount................................................................................5
Class A-2 Interest Rate...........................................................................................5
Class A-2 Notes................................................................................................1, 4
Class A-2 Stated Maturity Date.................................................................................2, 6
Class A-3 Initial Principal Amount................................................................................5
Class A-3 Interest Rate...........................................................................................5
Class A-3 Notes................................................................................................1, 4
Class A-3 Stated Maturity Date.................................................................................2, 6
Class A-4 Initial Principal Amount................................................................................5
Class A-4 Interest Rate...........................................................................................5
Class A-4 Notes................................................................................................1, 4
Class A-4 Stated Maturity Date.................................................................................2, 6
Class B Floor.....................................................................................................9
Class B Initial Principal Amount..................................................................................5
Class B Interest Rate.............................................................................................5
Class B Noteholders...............................................................................................2
Class B Notes..................................................................................................1, 4
Class B Percentage................................................................................................9
Class B Principal Payment.........................................................................................8
Class B Stated Maturity Date...................................................................................2, 6
Class B Target Investor Principal Amount..........................................................................9
Class C Floor.....................................................................................................9
Class C Initial Principal Amount..................................................................................5
Class C Interest Rate.............................................................................................5
Class C Notes..................................................................................................1, 4
Class C Percentage................................................................................................9
Class C Principal Payment.........................................................................................8
</TABLE>
A-i
<PAGE>
<TABLE>
<S> <C>
Class C Stated Maturity Date...................................................................................2, 6
Class C Target Investor Principal Amount..........................................................................9
Class D Floor....................................................................................................10
Class D Initial Principal Amount..................................................................................5
Class D Interest Rate.............................................................................................5
Class D Percentage................................................................................................9
Class D Stated Maturity Date...................................................................................2, 6
Class D Target Investor Principal Amount..........................................................................9
Class E Floor....................................................................................................10
Class E Initial Principal Amount..................................................................................5
Class E Interest Rate.............................................................................................5
Class E Percentage................................................................................................9
Class Floors.....................................................................................................10
clearing agency..................................................................................................33
clearing corporation.............................................................................................33
Code.............................................................................................................46
Collection Account...............................................................................................36
Commission........................................................................................................3
Conditional Payment Rate.........................................................................................42
Cooperative......................................................................................................35
Copelco Capital...................................................................................................6
Copelco Credit...................................................................................................27
Copelco Financial................................................................................................27
Copelco Funding LLC............................................................................................2, 4
Copelco Leasing..................................................................................................27
Cost per Copy....................................................................................................28
Cumulative Loss Amount...........................................................................................10
Cut-Off Date..................................................................................................4, 20
DCR..........................................................................................................17, 52
Definitive Notes.................................................................................................35
Depositaries.....................................................................................................33
Determination Date............................................................................................7, 37
Discount Rate.....................................................................................................5
Discounted Present Value of the Leases............................................................................5
Discounted Present Value of the Performing Leases.................................................................5
Division.........................................................................................................27
DTC...............................................................................................................3
Due Period........................................................................................................7
Dun & Bradstreet.................................................................................................30
Early Lease Termination..........................................................................................11
Eligible Account.................................................................................................36
Equipment.........................................................................................................7
Equipment Financing Portion......................................................................................28
ERISA........................................................................................................16, 49
Euroclear.........................................................................................................3
Euroclear Operator...............................................................................................35
Euroclear Participants...........................................................................................35
Events of Default................................................................................................39
Excess Copy Charge...............................................................................................28
Exchange Act......................................................................................................3
Fee Per Scan Charges.............................................................................................29
Filing Locations.................................................................................................19
First Union Capital Markets......................................................................................50
Fitch........................................................................................................17, 52
Fixed Payment....................................................................................................28
HILL.............................................................................................................29
</TABLE>
A-ii
<PAGE>
<TABLE>
<S> <C>
Holders..........................................................................................................36
Indenture.................................................................................................2, 13, 33
Indenture Trustee.................................................................................................2
Indirect Participants............................................................................................33
Initial Principal Amount..........................................................................................4
Interest Accrual Period...........................................................................................7
Interest Payments.............................................................................................7, 37
Interest Rate.....................................................................................................5
IRS..............................................................................................................47
Issuer.........................................................................................................2, 4
Lease Contracts...................................................................................................7
Lease Payment....................................................................................................36
Lease Receivables.................................................................................................7
Leases............................................................................................................7
Lessee...........................................................................................................11
Lessees..........................................................................................................11
Maintenance Charge...............................................................................................28
Nominal Buy-Out..................................................................................................21
Nominal Buy-Out Leases...........................................................................................18
Non-Performing Leases.........................................................................................6, 21
Non-U.S. Person..................................................................................................49
Notes..........................................................................................................1, 4
Offered Noteholders...............................................................................................3
Offered Notes..................................................................................................1, 4
OID..............................................................................................................47
Original Divisions...............................................................................................20
Outstanding Principal Amounts.....................................................................................7
Overcollateralization Balance....................................................................................10
Owner Trustee.....................................................................................................4
Participants.....................................................................................................33
Payment Date...................................................................................................2, 7
PILL.............................................................................................................29
Plan Asset Regulations...........................................................................................50
Prepayment.......................................................................................................18
Principal Payments................................................................................................7
PTCE.............................................................................................................50
Rating Agency................................................................................................17, 52
Record Date.......................................................................................................7
Registration Statement............................................................................................3
Required Payments................................................................................................37
Required Reserve Amount......................................................................................16, 37
Reserve Account..............................................................................................16, 37
Residual Casualty Payments.......................................................................................14
Residual Prepayments.............................................................................................14
Residual Warranty Payments.......................................................................................14
S&P..........................................................................................................17, 52
Sales and Servicing Agreement..............................................................................2, 6, 31
SBU..............................................................................................................27
Securities........................................................................................................2
Seller.........................................................................................................2, 6
Series Pool.......................................................................................................7
Service Advance..............................................................................................12, 39
Servicer.......................................................................................................2, 6
Servicer Events of Default.......................................................................................41
Servicing Fee....................................................................................................13
Sponsor........................................................................................................2, 4
</TABLE>
A-iii
<PAGE>
<TABLE>
<S> <C>
Stated Maturity Dates..........................................................................................2, 6
Statistical Discount Rate.........................................................................................5
Statistical Discounted Present Value of the Leases................................................................5
Substitute Lease.............................................................................................12, 42
Tax Counsel......................................................................................................46
Termination Payment..............................................................................................36
Terms and Conditions.............................................................................................35
Trust Agreement................................................................................................2, 4
Trust Fund........................................................................................................7
Trustee.......................................................................................................7, 33
U.S. Person......................................................................................................49
UCC..............................................................................................................18
Underwriters.....................................................................................................50
Underwriting Agreement...........................................................................................50
Vendor...........................................................................................................28
Warranty Lease...............................................................................................12, 32
</TABLE>
A-iv
<PAGE>
No dealer, salesman or any other person has been authorized
to give any information or to make any representations other
than those contained in this Prospectus in connection with
the offer made by this Prospectus and, if given or made, such
information or representations must not be relied upon.
Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create an
implication that there has been no change in the affairs of
the Seller or the Issuer or any affiliate thereof or the
Leases since the date hereof. This Prospectus does not
constitute an offer or solicitation by anyone in any state
in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not
Class A-1 qualified to do so to anyone to whom it is unlawful
to make such offer or solicitation.
TABLE OF CONTENTS
Page
Lease-Backed Notes, Series 1998-A
AVAILABLE INFORMATION................................... 3
REPORTS TO NOTEHOLDERS.................................. 3
PROSPECTUS SUMMARY...................................... 4
RISK FACTORS............................................ 18
USE OF PROCEEDS......................................... 20
THE SERIES POOL......................................... 20
COPELCO CAPITAL'S UNDERWRITING AND SERVICING PRACTICES.. 27
FORMATION OF THE ISSUER................................. 32
DESCRIPTION OF THE NOTES................................ 33
PREPAYMENT AND YIELD CONSIDERATIONS..................... 41
SECURITY FOR THE NOTES.................................. 45
THE INDENTURE TRUSTEE................................... 45
THE OWNER TRUSTEE....................................... 45
CERTAIN LEGAL MATTERS AFFECTING A LESSEE'S RIGHTS
AND OBLIGATIONS...................................... 45
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS.............. 46
ERISA CONSIDERATIONS.................................... 49
UNDERWRITING............................................ 50
LEGAL MATTERS........................................... 51
RATING OF THE OFFERED NOTES............................. 52
INDEX OF TERMS.......................................... A-1
Until November 4, 1998 (90 days after the date of this
Prospectus), all dealers effecting transactions in the
Notes, whether or not participating in this distribution,
may be required to deliver a Prospectus. This is in
addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
==============================================================
$648,875,560
Copelco Capital
Funding Trust 1998-A
$194,662,668 5.680%
Lease-Backed Notes, Series 1998-A
$92,208,632 5.780% Class A-2
Lease-Backed Notes, Series 1998-A
$148,558,352 5.780% Class A-3
Lease-Backed Notes, Series 1998-A
$162,218,890 5.920% Class A-4
Lease-Backed Notes, Series 1998-A
$17,075,673 5.940% Class B
Lease-Backed Notes, Series 1998-A
$13,660,538 6.010% Class C
Lease-Backed Notes, Series 1998-A
$20,490,807 6.330% Class D
Lease-Backed Notes, Series 1998-A
___________________
P R O S P E C T U S
___________________
FIRST UNION CAPITAL MARKETS
LEHMAN BROTHERS
PRUDENTIAL SECURITIES INCORPORATED
Dated August 6, 1998
=============================================================
